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**UNITED STATES**

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

 

**FORM 10-K**

 

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

 

**For the Fiscal Year Ended December 31,2009**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**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 registered pursuant to Section 12(g) of theAct:

 

**CommonStock, $.001 par value**

 

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

 

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

 

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

 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-X is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K.  o

 

Indicate bycheck mark whether the Registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to submit and post such files). YES   o      NO  o

 

Indicate bycheck mark whether the Registrant is a large accelerated filer, an acceleratedfiler, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of theExchange Act.  (Check one):

 

| Large  accelerated filer o |   | Accelerated  filer o         |
|----------------------------|--------|-----------------------------------|
|                       |   |                              |
| Non-accelerated  filer o   |   | Smaller  reporting company x |

 

Indicate bycheck mark whether the Registrant is a shell company (as defined in Rule 12b-2of the Act.  YES   o      NO  x

 

The aggregate market value of the Common Stockof the Registrant held by non-affiliates as of June 30, 2009, based uponthe average bid and asked price of $3.00 as reported on the OTC Bulletin Boardon that date, was $26,614,920.00.  As of March 8,2010, there were 8,871,640 shares of Common Stock of the Registrant deemedoutstanding.

 

**APPLICABLE ONLY TO ISSUERSINVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:**

 

Indicate by check mark whether the Registranthas filed all documents and reports required to be filed by Section 12, 13or 15(d) of the Securities Exchange Act of 1934 subsequent to the distributionof securities under a plan confirmed by a court.  YES o  NO o

 

Documents incorporated by reference: None.

 

 

 

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**TRANS WORLD CORPORATIONFORM 1O-K**

** **

**TABLE OF CONTENTS**

 
| ** **   | ** ** | ** **                                                   | **Page** |
|--------------|------------|--------------------------------------------------------------|----------|
| PART I. |       |                                                         |     |
|         | Item  1.   | Business                                                     | 1        |
|         |       | General Development of Business                              | 1        |
|         |       | Corporate  Information                                       | 1        |
|         |       | Description  of Business                                     | 2        |
|         |       | Market Overview and Competition                              | 2        |
|         |       | Costs and Effects of Environmental Compliance                | 2        |
|         |       | Research  and Development                                    | 2        |
|         |       | Internet Access                                              | 3        |
|         |       | Our Facilities                                               | 3        |
|         |       | Future Operations                                            | 4        |
|         |       | Long  Range Objective                                        | 4        |
|         |       | Marketing                                                    | 4        |
|         |       | Regulations  and Licensing                                   | 4        |
|         |       | Application of Future or Additional Regulatory  Requirements | 5        |
|         |       | Taxation                                                     | 5        |
|         |       | Our Employees                                                | 6        |
|         | Item 1A.   | Risk Factors                                                 | 7        |
|         | Item 1B.   | Unresolved  Staff Comments                                   | 10       |
|         | Item 2.    | Properties                                                   | 10       |
|         |       | Our Corporate Offices                                        | 11       |
|         |       | Czech  Republic                                              | 11       |
|         | Item 3.    | Legal Proceedings                                            | 11       |
|         | Item 4.    | Submission  of Matters to a Vote of Security Holders         | 11       |

 

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**TABLE OF CONTENTS**

 
| ** **    | ** ** | ** **                                                                                                          | **Page** |
|---------------|------------|---------------------------------------------------------------------------------------------------------------------|----------|
| PART II. |       |                                                                                                                |     |
|          | Item 5.    | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 12       |
|          |       | Market Prices                                                                                                       | 13       |
|          |       | Dividends                                                                                                           | 13       |
|          | Item 6.    | Selected  Financial Data                                                                                            | 14       |
|          | Item 7.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         | 15       |
|          |       | Forward-Looking  Statements                                                                                         | 15       |
|          |       | Performance  Measures and Indicators                                                                                | 15       |
|          |       | Exchange Rates                                                                                                      | 15       |
|          |       | Critical  Accounting Policies                                                                                       | 16       |
|          |       | Results of Operations                                                                                               | 17       |
|          |       | Our  Business Units:                                                                                                | 18       |
|          |       | Ceska, Czech Republic                                                                                               | 18       |
|          |       | Rozvadov, Czech  Republic                                                                                           | 19       |
|          |       | Route 59, Czech Republic                                                                                            | 19       |
|          |       | Route 55, Czech Republic                                                                                            | 19       |
|          |       | Grand Casino Lav,  Croatia                                                                                          | 19       |
|          |       | Hotel Savannah and the  Spa                                                                                         | 19       |
|          |       | Liquidity and  Capital Resources                                                                                    | 20       |
|          |       | Our Plan of Operations                                                                                              | 21       |
|          | Item 7A.   | Quantitative  and Qualitative Disclosures About Market Risk                                                         | 21       |
|          | Item 8.    | Financial  Statements and Supplemental Data                                                                         | 23       |
|          | Item 9.    | Changes In  and Disagreements with Accountants on Accounting and Financial Disclosure                               | 48       |
|          | Item 9A.   | Controls and  Procedures                                                                                            | 48       |
|          | Item 9B.   | Other Information                                                                                                   | 49       |

 

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**TABLE OF CONTENTS**

 
| ** **     | ** ** | ** **                                                                                       | **Page** |
|----------------|------------|--------------------------------------------------------------------------------------------------|----------|
| PART III. |       |                                                                                             |     |
|           | Item 10.   | Directors,  Executive Officers and Corporate Governance                                          | 49       |
|           |       | Information  about our Board and its Committees:                                                 | 50       |
|           |       | Audit  Committee                                                                                 | 51       |
|           |       | Compensation Committee                                                                           | 51       |
|           |       | Nominating Committee                                                                             | 51       |
|           |       | Section 16(a) Beneficial  Ownership Reporting Compliance                               | 51       |
|           |       | Code of Ethics                                                                                   | 52       |
|           | Item 11.   | Executive  Compensation                                                                          | 52       |
|           |       | Compensation  Discussion and Analysis                                                            | 52       |
|           |       | Compensation Committee Interlocks and Insider  Participation                                     | 56       |
|           |       | Summary Compensation Table                                                                       | 56       |
|           |       | Equity  Compensation Plans                                                                       | 57       |
|           |       | Outstanding Equity Awards at Fiscal Year-End                                                     | 58       |
|           |       | Options Exercised and Stock Vested                                                               | 59       |
|           |       | Nonqualified Deferred Compensation                                                               | 59       |
|           |       | Employment and Change of Control Agreements                                                      | 59       |
|           |       | Potential Payments upon Termination of Employment or a  Change in Control                        | 60       |
|           |       | Directors’  Compensation                                                                    | 61       |
|           |       | Employment/Severance Agreements                                                                  | 61       |
| .              | Item 12.   | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 63       |
|           | Item 13.   | Certain  Relationships and Related Transactions, and Director Independence                       | 65       |
|           | Item 14.   | Principal  Accounting Fees and Services                                                          | 65       |

 

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| ** **                                 | ** ** | ** **                                  | **Page** |
|--------------------------------------------|------------|---------------------------------------------|----------|
| PART IV.                              |       |                                        |     |
|                                       | Item 15.   | Exhibits  and Financial Statement Schedules | 66       |
|                                       |       |                                        |     |
| EXHIBITS INDEX                             | 67         |
| SIGNATURES AND CERTIFICATIONS              | 70         |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | 23         |

 

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*Thefollowing discussion should be read in conjunction with the consolidatedfinancial statements and notes thereto included elsewhere in this Annual Reporton Form 10-K. This Annual Report on Form 10-K contains certainforward-looking statements including expectations of market conditions,challenges and plans, within the meaning of Section 21E of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), and is subject to theSafe Harbor provisions created by that statute. Reference is made to Part II,Item 7 “Management’s  Discussion andAnalysis of Financial Condition and Results of Operations — Forward LookingStatements” for a discussion of the Registrant’s qualifications with respect tocertain information presented in this Annual Report on Form 10-K.*

 

**Item 1.  Business.**

 

**General Development of Business**

 

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

 

The Czech casinos, which conduct business under our registered brandname, *American Chance Casinos* (“ACC”), aresituated at border locations and draw the majority of their customers fromGermany and Austria.  Each of the casinoshas a distinctive theme, portraying recognizable eras of American history:Pacific South Seas, Chicago in the Roaring 1920’s during Prohibition, NewOrleans in the 1920’s, and Miami Beach in the 1950’s.  ACC’s operating strategy centers ondifferentiating its products and service offerings from the very formal Germanand Austrian casinos, and as a result, management has endeavored to creategaming environments 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.

 

In addition to the above operations, on January 14, 2009 and April 16,2009, we held the soft-opening and grand gala-opening, respectively, of ourHotel Savannah, a 77-room, four-star deluxe hotel, which is physicallyconnected to our Route 59 casino.  A full-servicespa, the Spa at Savannah (the “Spa”), which is attached to the hotel, wascompleted and launched concurrently with the gala-opening of HotelSavannah.  The hotel features banquethalls for meetings and special events as well as a full-service restaurant andbar.

 

We have no operating presence in the United States.

 

**Corporate Information**

 

Our corporate offices are located at 545 Fifth Avenue, Suite 940,New York, New York 10017, our telephone number is (212) 983-3355, our websiteis www.transwc.com and the ACC website is www.acc.cz.  Neitherwebsites are a part of this Form 10-K.

 

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**Descriptionof Business**

 

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

 

**Market Overview and Competition**

 

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

 

As of December 31, 2009, five casinos operate in directcompetition with our Ceska casino, while one competitor casino operates acrossthe street from our Rozvadov casino. Each of our Route 59 and Route 55 casinos currently has two directcompetitors.  Some of these competitorsare larger and have financial and other resources that are greater thanours.  While we do not consider ourbusiness to be seasonal, it is occasionally subject to extreme weatherconditions.  See Item 1A “Risk Factors —Climate Impact.”

 

The Grand Casino Lav, which opened on December 22, 2006, targetsthe immediate region surrounding Split, a resort destination and a UnitedNations Educational, Scientific and Cultural Organization (“UNESCO”)-recognizedcity, as well as neighboring countries. The Grand Casino Lav has two competitors.

 

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

 

**Costs and Effects of Environmental Compliance**

** **

We incurred no material costs or effects of environmental compliancefor the year ended December 31, 2009.

 

**Researchand Development**

 

The Company does not engage in research and development other thaninternal market research for general business development, and does not accountfor research expenditures separately under generally accepted accountingprinciples and, in any event, did not incur any separate research anddevelopment expense for 2009, 2008 or 2007.

 

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**Internet Access**

** **

**We are asmaller reporting company under the rules of the Securities and ExchangeCommission (“SEC”). Copies of our Annual Reports on Form 10-K, QuarterlyReports on Form 10-Q, Current Reports on Form 8-K and amendments tothose reports filed or furnished pursuant to Section 13(a) or 15(d) ofthe Securities Exchange Act of 1934 (the “Exchange Act”) are available free ofcharge on or through our website (www.transwc.com) as soon as reasonablypracticable after we electronically file the material with, or furnish it to,the Securities and Exchange Commission. In addition, the public may read andcopy any materials we file with the SEC at the SEC’s Public Reference Room at100 F Street, NE, Washington, D.C. 20549. The public may obtain information onthe operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov)that contains reports, proxy and information statements, and other informationregarding issuers (including the Company) that file electronically with theSEC.**

** **

**Our Facilities**

** **

**As a complement to our gaming operations, werecently opened Hotel Savannah, a 77-room, European four-star deluxe hotel, thefirst constructed hotel for the Company. In connection with the hotel, we also launched a full-service spa, theSpa, which is attached to the hotel.  TheSpa features a large indoor pool and Ayurvedic massage therapy, which operatedby a local sub-contractor.  HotelSavannah is connected to our Route 59 casino with the joint facility’s mainrestaurant linking the two buildings. The hotel held its soft-opening on January 14, 2009 and both HotelSavannah and the Spa held their joint grand-gala opening on April 16, 2009to great fanfare.  The combined operationof hotel and spa is expected to assist Route 59 in attracting business,contribute incremental cash, and ultimately enhance the Company’s overallresults.**

** **

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

** **

OurCeska casino, which has a 1920’s Chicago Prohibition Period theme, has 15gaming tables, including eight card tables and seven roulette tables.  At the beginning of 2010, Ceska added, inaggregate, 8 new video slot machines, bringing the total to the current 80, asof February 28, 2010.  The addressof our Ceska casino is Ceska Kubice 64, Ceska Kubice 345 32, Czech Republic.

 

OurRozvadov casino, which has a South Pacific theme, operates 8 gaming tables,including four card tables and four roulette tables, and 20 video slotmachines, as of February 28, 2009. Our Rozvadov casino is located at Rozvadov 26, Rozvadov 348 07, CzechRepublic.

 

OurRoute 59 casino, whose address is Route 59, 199 American Way, Hate-Chvalovice, Znojmo669 02, as of February 28, 2010, included 25 gaming tables, which consist of 15card tables, nine roulette tables, and a Slingshot multi-win roulette table,and 114 video slot machines, 12 of which were added on January 1,2010.  In March 2009, a reception area in the corridorbetween the casino and adjacent Hotel Savannah has been opened to permit easieraccess between the two operations.

 

Our largest casino, Route55, features a Miami Beach “Streamline Moderne” style, reminiscent of MiamiBeach in the early 1950’s.  The two-storycasino offers 23 tables, including 12 card tables, 10 roulette tables, aSlingshot multi-win roulette table, and 124 video slot machines.  On the mezzanine level, the casino offers afull-service, Italian restaurant, an open buffet area, a VIP lounge, and a VIPgaming room equipped with four gaming tables, which are included in the 23table count.  This casino is at Route 55,Grenzubergang Wullowitz, Dolni Dvoriste 382 72, Czech Republic.

 

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As of February 28,2010, our Grand Casino Lav had 18 gaming tables, including six roulette tables,eleven card tables, two of which are in the VIP dedicated area, amulti-roulette table, and 60 video slot machines, a panoramic mezzanine barwith a view overlooking the gaming floor, and a full-service nightclub.  The address of the Grand Casino Lav isGrljevacka 2A, Podstrana 21312, Croatia.

 

**FutureOperations**

 

In furtherance of ourdiversification goals, we are seeking to enhance our casino units withcomplementary operations, as was done for Route 59 with the addition of HotelSavannah and the Spa, or as stand-alone operations, such as hotels.

 

**Long Range Objectives**

 

Ouroperations are predominantly in the gaming industry.  Consequently, our senior corporatemanagement, several of whom have extensive experience in the hotel industry,are exploring ways to expand the Company’s operations through the acquisitionand/or development of new, complementary non-gaming business units, whilecontinuing to grow the Company’s existing operations.  In this regard, we have made a first step,with our first internally developed hotel, Hotel Savannah.  We will also seek to manage or lease new business unitsthat complement 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**

# ** **

Inthe year ended December 31, 2009, in reaction to heightened competitivepressures and the worldwide economic recession, we increased and expanded ourmarketing and promotional programs, focusing on higher-value amenities, moregiveaways and additional live entertainment, in an ongoing effort to secure andenhance our competitive position in the markets that we serve.  The casinos’ event calendars were broadenedto attract new players, while focusing on higher player-incentive games toretain existing players.  In addition, wecontinued our sponsorships of several regional, athletic teams and were abenefactor in a number of community and social projects during the year, as away to further promote our image and positive contribution to the communitiesin which we operate.  We also continuedour popular, cultural-themed and holiday-related parties, which feature liveentertainment, raffles and complimentary grand buffets.  Further, we aggressively targeted key citiesin our media campaigns, most notably Vienna, Linz and Regensburg and the areassurrounding these cities.

 

Dueto a limited marketing budget from the owner in 2009, Grand Casino Lav reliedprimarily on self-funded marketing programs.

 

# **Regulations and Licensing**

# ** **

In1998, the Czech Republic House of Deputies passed an amendment to the gaminglaw, which restricted foreign ownership of casino licenses.  In response, we restructured our Czechsubsidiaries and legal entities to comply with the amendment and were subsequentlygranted 10-year gaming licenses or permits, which have since been renewed bythe government of the Czech Republic for another 10-year term, expiring in2018.  The permits are amended each timewe add a new operating branch or unit. The no-cost permits are renewable by application and must be granted aslong as the corporate casino operator meets the following conditions: (i) maintainthe required basic capital, which includes our gaming bonds of 26 million CzechKoruna (“CZK”) for our gaming subsidiaries; (ii) be designated as a publicor private stock company (using the Czech abbreviation “a.s.”); (iii) haveexecutive board members of said Czech stock company without criminal records;and (iv) have no overdue taxes.  Weare currently in compliance with all such conditions.

 

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Therecan be no assurance that such licenses, approvals or findings of suitabilitywill be obtained or will not be revoked, suspended or conditioned, or that wewill be able to obtain the necessary approvals for our future activities.

 

**Application of Future orAdditional Regulatory Requirements**

 

Inthe future, we may seek the necessary licenses, approvals and findings ofsuitability in other jurisdictions, where the Company plans to conductbusiness.

 

In August 2009, a Hungarian company, KCBidding Kft. (“KCB”), in which we hold a 25% equity interest, was awarded bythe Republic of Hungary the right to open a “Class I” casino in theadministrative area of the Central-Transdanubian Region of Hungary, west ofBudapest.  A “Class I” casino isdefined as a casino that operates a minimum of 100 gaming tables and 1,000 slotmachines.  With the award in hand, KCB,which is 75% owned by Vigotop Limited, a Cyprus-based company, then executed aconcession contract with the Republic of Hungary on October 9, 2009.  Subsequently, KC Bidding Kft founded alicense concession company, SDI Europe Kft., which is a wholly-owned subsidiaryof KCB, for the purpose of operating the Class I casino.  According to the terms of the award and onceall regulatory requirements are met, the casino license will be granted for 20years from the date of opening, which must occur on or before January 1,2014, with one, 10-year extension option. During this time, no additionalcasino licenses will be granted by the Hungarian government in this region.

 

TWC’s development and operations teams inEurope played key roles in the award process, providing critical industry expertiseand technical support to the Company’s partner and the majority owner of KCB,Vigotop Limited.  In exchange for ourservices, we received the aforementioned ownership stake in KCB, from which westand to earn a fee by means of a structured buyout.  Under the terms of the buyout optionagreement, which expires on August 14, 2012, TWC’s minority interest inKCB is subject to acquisition by Vigotop Limited, at Vigotop Limited’s option,through the purchase of TWC’s shares in KCB for approximately $1.3 million,which would represent TWC’s fee for services rendered.  In the event that Vigotop Limited does notexercise its buyout option, the shareholders of KCB will continue their ongoingdevelopment of the casino project, and it is possible that we could ultimatelymanage the mega casino under our American Chance Casinos brand.  There are no assurances that we would beselected to manage this future operation, if and when completed.

 

**Taxation**

 

*Value Added Taxes*

 

In conformity withthe European Union (“EU”) taxation legislation, when the Czech Republic joinedthe EU in 2004, its value added tax (“VAT”) increased from 5% to 22%, beginningin January 2004, and up to December 31, 2009, ranged between 9% and19% for all intra-EU generated purchases. All non-EU generated purchases wereimpacted by identical VAT increases, beginning in May 2004.  Beginning January 1, 2010, VAT rateswill increase to between 10% and 20% in the Czech Republic.  Unlike in other industries, VATs are notrecoverable for gaming operations.

 

*GamingTaxes*

 

The majority of ourrevenues are derived from gaming operations in the Czech Republic, which aresubject to gaming taxes and, therefore, we have minimal corporate income taxliabilities under Czech law.  For theyear ended December 31, 2009, our gaming taxes, which are recognized inthe cost of revenue, averaged approximately 14.5% of gross gaming revenues,which is 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” (i.e. a tax) accordingto the formula below, net of the aforementioned taxes and fees.  For slot games revenue, the applicableassessment is the charity tax (described below) for publicly beneficial,cultural, sporting and welfare purposes, net of local (municipality)administration and slot state-licensing fees.

 

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Gaming taxes payable aredue to the Czech Ministry of Finance annually, typically in March, whilecharity contributions tax payable, although having no stated due dates, arepaid as arranged with the designated charities, customarily by May of thesubsequent year.  The Company mayallocate this charity contribution to local schools, sports clubs, subsidizedor volunteered organizations, or municipalities in which each of the Company’scasinos operate.  The distribution issubject to the prior approval of the Czech Ministry of Finance.

 

Charity taxes arecomputed on the reported slot revenues of each of our three slot subsidiarycompanies, ACC Slot, s.r.o., Hollywood Spin s.r.o. and LMJ Slot s.r.o..  For the year ended December 31, 2009,slot revenues of ACC Slot, s.r.o., were subject to the 10% charity tax rate,while slot revenues of Hollywood Spin s.r.o. and LMJ Slot s.r.o. were eachsubject to the 8% tax rate.  Charity taxrates apply according to the following revenue tiers:

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

 

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(1) 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.

 

*CorporateIncome Taxes*

 

Our Czech subsidiaries’ gaming revenues are subject to applicablegaming taxes, however our Czech holding companies’ revenues, net of exemptedrevenues, such as inter-group dividends, are subject to Czech corporate incometax, which was 20% for year 2009. Additionally, our non-gaming revenues are also subject to the Czechcorporate income tax.

 

In 2009, we incurred estimated Czech corporate income taxes ofapproximately $14,000 on non-gaming revenues, versus $31,000 in 2008, as aresult of lower taxable revenue generated, which includes ancillary sales suchas food, beverage, cigarettes and gift items. There can be noassurances that tax rates, fees, or other payments applicable to our gamingoperations will not be increased in the future. (See also Note 2 and 10 of the Notes to the Consolidated FinancialStatements).

 

**OurEmployees**

 

Asof December 31, 2009, we had a total of 648 full-time employees, including119 in our casino in Ceska Kubice, 45 in our casino in Rozvadov, 178 at Route59, 173 in at Route 55, 35 at Hotel Savannah and the Spa, 19 in our sharedservices office located above the Ceska casino, and five in the Company’sheadquarters in New York.  Under theGrand Casino Lav management contract, we also supervised 74 employees of GrandHotel Lav, d.o.o..  None of our employeesare represented by a union nor are we a party to any labor contract.  We believe that our employee relations areexcellent.

 

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**Item 1A.  Risk Factors.**

 

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

 

***General EconomicTrends are Unfavorable***

 

There is apossibility that the recent significant economic downturn being experienced inEurope has and may, in the future, have, a negative impact on our financialperformance. Adverse conditions in local, regional, national and global marketscould likely negatively impact our operations in the near future. Duringperiods of economic contraction like that currently being experienced, certaincosts can remain fixed or even increase, while revenues decline. The gamingservices we provide are similar to other leisure activities in that they dependon personal discretionary expenditures, which are likely to decline duringeconomic downturns. In some cases, even the perception of an impending economicdownturn or the continuation of a recessionary climate can be enough todiscourage consumers from spending on leisure activities. We cannot predict atthis time what the full effect will be of the current global recession on ourbusiness, financial condition, or results of operations.

 

***We Face SignificantCompetition***

 

We operate in ahighly competitive industry with a large number of participants, some of whichhave financial and other resources that are greater than ours. The gamingindustry faces competition from a variety of sources for discretionary consumerspending including spectator sports and other entertainment and gaming options,as well as home entertainment alternatives. Competitive gaming activitiesinclude traditional casinos, video lottery terminals, state-sponsored lotteriesand other forms of legalized gaming in the Czech Republic and in otherjurisdictions.

 

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

 

Additionally,web-based interactive gaming and wagering is growing rapidly and may beaffecting competition in our industry. Web-based businesses may offer consumersa wide variety of events to wager on, including other games, racetracks andsporting events. Unlike most on-line and web-based gaming companies, ouroperations require ongoing capital expenditures for both their continued smoothoperations and growth. We could also face significantly greater costs inoperating our business compared to these Internet gaming companies. We cannotoffer the same number of gaming options as on-line and Internet-based gamingcompanies. Many on-line and web-based gaming companies are based off-shore andavoid regulation under applicable Czech laws. These companies may divertwagering dollars from live wagering venues, such as our casinos. The continuedgrowth and success of these on-line ventures could have a material, adverseimpact on our business, financial condition, and results of operations.

 

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

 

Our facilities in theCzech Republic represent a significant portion of our business, and the revenuegenerated is generally denominated in Euros (“EUR”) and the expenses incurredby these facilities are generally denominated in Czech Korunas (“CZK”).  A decrease in the value of either of thesecurrencies in relation to the value of the U.S. dollar (“USD”) would decreasethe revenue and operating profit from our operations when translated into U.S.dollars, which would adversely affect our consolidated results ofoperations.  (See also “Item 

 

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7A. Quantitative and Qualitative Disclosure aboutMarket Risk”).  We do not currently hedgeour exposure to fluctuations of these foreign currencies, and there is noguarantee that we will be able to successfully hedge any future foreigncurrency exposure, if we subsequently choose to do so.

 

***Need to Diversify***

 

Atthis time, our operations are primarily located in the Czech Republic.  Therefore, any future adverse legislation ofthe Czech Republic may have a negative impact on our operations and financialresults.  We are currently seeking todevelop or acquire additional interests in gaming operations and hotels inother European countries.  However, therecan be no assurance that we will be able to develop or acquire such newoperations in the future.

 

***Taxation of GamingOperations***

 

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

 

***Dependence upon Key Personnel***

 

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

 

***Need for AdditionalFinancing***

 

Althoughwe have achieved positive net income for the seventh consecutive year, pursuantto our growth strategies, we require additional debt and/or equity financingfor the acquisition and development of new businesses or business units.  In this regard, our ability to obtainadditional financing has been improved significantly, as evidenced by oursecuring of the Commerzbank Aktiengesellschaft, pobocka Praha (“Commerzbank”)revolving credit facility in 2008, and subsequent replacement in November 2009by a Commerzbank, two-tranche credit facility, consisting of a 4-year term loanand a smaller revolving credit line (see“Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations — Liquidity and Capital Resources”).  Despite these improvements, there can be noassurance that such financing will continue to be available on terms favorableto us or at all.

 

***International Activities***

 

Ouroperations are completely outside of the United States. Operatinginternationally involves additional risks relating to such things as currencyexchange rates, different legal or regulatory environments, political andeconomic risks relating to the stability or predictability of foreigngovernments, differences in the manner in which different cultures do business,difficulties in staffing and managing foreign operations, differences infinancial 

 

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reporting, operatingdifficulties, different types of criminal threats and other factors. Theoccurrence of any of these risks, if severe enough, could have a materialadverse effect on our financial condition or results of operations.

 

***Climate Impact***

 

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

 

***Licensing and Regulation***

 

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

 

In1998, the Czech Republic’s House of Deputies passed an amendment to the gaminglaw, which restricted foreign ownership of casino licenses. In response, theCompany restructured its subsidiaries and Czech legal entities to comply withthe amendment and was subsequently granted 10-year gaming licenses, which, in October 2008,were renewed by the government of the Czech Republic for another 10-year term,expiring in December 2018.  Therecan be no assurance that the authorities in the Czech Republic will not amendthe gaming law as it pertains to foreign ownership of casino licenses.  In the event the gaming laws are amended inthe future, it may have a material adverse effect on the Company’s futureprofitability and operations.

 

***Liability Insurance***

 

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

 

***No Dividends***

 

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

 

***Dilutive Effect of Options andWarrants***

 

As of February 28,2010, there were 838,745 options and 75,000 warrants outstanding to purchaseshares of our common stock, which, if all were exercised, would represent 9.3%of the 9,785,385 shares 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.

 

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***Possible Adverse Effect of Issuance of PreferredStock***

 

Our Articles ofIncorporation authorize the issuance of four (4) million shares of “blankcheck” preferred stock, with designations, rights and preferences to bedetermined from time to time by our Board of Directors. Accordingly, our Boardof Directors is empowered, without further stockholder approval, to issuepreferred stock with dividend, liquidation, conversion, voting or other rightsthat could adversely affect the voting power or other rights of the holders ofthe common stock. In the event of issuance, the preferred stock could be used,under certain circumstances, as a method of discouraging, delaying orpreventing a change in control of the Company. Our Board of Directors has no current plans to issue any shares ofpreferred stock. However, there can be no assurance that preferred stock willnot be issued at some time in the future.

 

**Item 1B. Unresolved Staff Comments.**

 

None.

 

**Item 2. Properties.**

 

Arecap of our properties as of February 28, 2010 is presented below insquare meters (“Sq.M”) and in square feet (“Sq.Ft”):

 
| ** **                       | ** ** | **Managed/** | ** ** | ** ** | ** ** | **Area Total** | ** ** | **Building** | ** ** |
|----------------------------------|------------|--------------|------------|------------|------------|----------------|------------|--------------|------------|
| **Location**                     | ** ** | **Leased**   | ** ** | **Owned**  | ** ** | **Sq.M**       | ** ** | **Sq.Ft**    | ** ** | **Sq.M** | ** ** | **Sq.Ft** | ** ** |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **New York**                     |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Corporate  Offices               |       | X            |       |       |       | 151            |       | 1626         |       | 151 |   | 1626 |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Ceska Kubice**                 |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Casino                           |       | X            |       |       |       | 3,055          |       | 32,884       |       | 1,767 |   | 19,020 |   |
| Staff  Housing                   |       | X            |       |       |       | 3,680          |       | 39,611       |       | 1,660 |   | 17,868 |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Folmava**                      |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Vacant  Land                     |       |         |       | X          |       | 15,000         |       | 161,459      |       |   |   |   |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Rozvadov**                     |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Casino                           |       |         |       | X          |       | 3,158          |       | 33,992       |       | 425 |   | 4,575 |   |
| Staff  Housing                   |       |         |       | X          |       | 965            |       | 10,387       |       | 165 |   | 1,776 |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Hate**                         |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Casino  (Route 59)               |       |         |       | X          |       | 8,036          |       | 86,499       |       | 1,588 |   | 17,093 |   |
| Hotel                            |       |         |       | X          |       | 9,060          |       | 97,521       |       | 3,060 |   | 32,938 |   |
| Staff  Housing                   |       | X            |       |       |       | 1,594          |       | 17,158       |       | 1,594 |   | 17,158 |   |
| Vacant  Land                     |       |         |       | X          |       | 39,934         |       | 429,846      |       |   |   |   |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Dolni Dvoriste**               |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Casino  (Route 55)               |       |         |       | X          |       | 18,502         |       | 199,154      |       | 1,882 |   | 20,258 |   |
| Staff  Housing 1                 |       | X            |       |       |       | 1,066          |       | 11,474       |       | 1,066 |   | 11,474 |   |
| Staff  Housing 2                 |       | X            |       |       |       | 512            |       | 5,511        |       | 437 |   | 4,704 |   |
| Vacant  Land                     |       |         |       | X          |       | 27,251         |       | 293,327      |       |   |   |   |   |
|                             |       |         |       |       |       |           |       |         |       |   |   |   |   |
| **Split (GCL)**                  |       |         |       |       |       |           |       |         |       |   |   |   |   |
| Casino &  Nightclub (1) |       | X            |       |       |       | 2,800          |       | 30,139       |       | 2,800 |   | 30,139 |   |

 

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(1) TWC manage the operationunder a 10-year management contract, expiring in 2017.

 

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**Our Corporate Offices**

 

Our corporate offices arelocated at 545 Fifth Avenue, Suite 940, New York, New York, occupying1,626 square feet of office space pursuant to the pending renewal in 2010 ofour five-year lease to expire in March 2015.

 

**Czech Republic**

 

We lease the casino facilityin Ceska Kubice.  The casino buildinglease was recently renewed to 2018. ** **We also own a parcel of raw land inFolmava, Czech Republic, in the same region as the existing Ceska casino.

 

In Rozvadov, we own the casino building and an adjacent facility forstaff accommodations.

 

In Hate, we own the casinobuilding and a parcel of land upon a portion of which the casino buildingsits.  On another portion of this land,we constructed and opened Hotel Savannah and the Spa, which are connected tothe Route 59 casino.  We opened the hotelon January 14, 2009, and on April 16 of the same year, we held theofficial launch of Hotel Savannah and the Spa.

 

InApril 2002, we acquired a parcel of land in Dolni Dvoriste, CzechRepublic.  On this parcel, we constructedour fourth and largest casino, Route 55, which was completed and opened in December 2004.  The casino’s construction was financed inpart by a CZK 60 million loan with GE Capital Bank a.s. which was subsequentlypaid off by funds drawn against the Commerzbank revolvingcredit facility that we secured in July 2007 (see “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources”).

 

We also lease on an annualbasis accommodations for staff in Ceska Kubice, Hate (Route 59) and in DolniDvoriste (Route 55).

 

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

 

We are often subject to various contingencies, theresolutions of which, our management believes will not have a material adverseeffect on our consolidated financial position or results of operations.  We are not currently involvedin any material legal proceeding nor were we involved in any materiallitigation during the year ended December 31, 2009.

 

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

 

No matters were submitted toa vote of security holders during the fourth quarter of the fiscal year coveredby this Report.

 

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## **Table of Contents**

 

## **PART II**

## ** **

**Item 5.****Market for Registrant’s CommonEquity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

 

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

 

The following graph illustrates a five-yearcomparison of cumulative total return performance of our Common Stock duringthe years beginning December 31, 2004 through December 31, 2009, andcompares it to the cumulative total return on the “NASDAQ Composite” and the “S&PSmallCap 600” indices.   The comparisonassumes a $100 investment on December 31, 2004, in our Common Stock and ineach of the foregoing indices, and assumes reinvestment of dividends, if any.

 

 

The above table is not intended to forecastfuture performance of our Common Stock.

 

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**Market Prices**

 

Asof February 28, 2010, our stock price was $3.00.  The following table sets forth the high andlow prices of the Company’s Common Stock for fiscal years 2008 and 2009 asquoted on OTC Bulletin Board. All such quotations reflect inter-dealer prices,without retail mark up, mark down or commission, and may not represent actualtransactions.

 
| **Common Stock** | ** ** | **High** | ** ** | **Low** | ** ** |
|------------------|------------|----------|------------|---------|------------|
| **2008**         |       |     |       |    |       |
| First Quarter    |       | $        | 4.50       |    | $          | 2.60 |   |
| Second Quarter   |       | $        | 3.90       |    | $          | 3.02 |   |
| Third Quarter    |       | $        | 3.75       |    | $          | 2.60 |   |
| Fourth Quarter   |       | $        | 3.75       |    | $          | 1.80 |   |
| **2009**         |       |     |       |    |       |
| First Quarter    |       | $        | 3.00       |    | $          | 1.80 |   |
| Second Quarter   |       | $        | 3.25       |    | $          | 2.21 |   |
| Third Quarter    |       | $        | 3.25       |    | $          | 2.60 |   |
| Fourth Quarter   |       | $        | 3.05       |    | $          | 2.60 |   |

 

As of February 28,2010, there were 8,871,640 outstanding shares of Common Stock held of record byapproximately 400 shareholders and outstanding options to purchase an aggregateof 838,745 shares of Common Stock, of which 463,745 options are immediatelyexercisable.  At such date, there werealso outstanding warrants to purchase 75,000 shares of Common Stock, of which25,000 warrants are vested and exercisable, as well as 75,000 shares ofrestricted stock, none of which have vested. In addition, there are 45,486 shares of Common Stock issuable under theCompany’s Deferred Compensation Plan at February 28, 2010.

 

**Dividends**

 

We have not paid any dividends to date on our CommonStock, and do not expect to declare or pay any dividends in the foreseeablefuture.  We intend to retain futureearnings, if any are generated, for investment in our current operations andfor future project developments.

 

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**Item 6. Selected Financial Data.**

 

The selected financial databelow should be read in conjunction with “Part II, Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” aswell as “Part II, Item 8. Financial Statements and Supplemental Data” ofthis Form 10-K.

 
| ** **                                 | ** ** | **At or For the Year Ended December 31,** | ** ** |
|--------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                 | ** ** | ** **                                     | ** ** | ** ** | ** ** | **2009 vs. 2008** | ** ** |
| **(in  thousands, except per share data)** | ** ** | **2009 (1)**                                   | ** ** | **2008** | ** ** | **Variance $** | ** ** | **Variance %** | ** ** |
| ** **                                 |       |                                           |       |   |   |   |   |   |   |
| **Results of Operation:**                  |       |                                           |       |   |   |   |   |   |   |
|                                       |       |                                           |       |   |   |   |   |   |   |
| **Total Revenue**                          |       | $                                              | 35,395     |   | $ | 36,424 |   | $ | (1,029 | ) | -2.8 | % |
| less  Cost of Revenues                     |       | 19,225                                         |       | 19,674 |   | 449 |   | 2.3 | % |
| **Gross Operating Income**                 |       | $                                              | 16,170     |   | $ | 16,750 |   | $ | (580 | ) | -3.5 | % |
| less:                                      |       |                                           |       |   |   |   |   |   |   |
| Depreciation  and Amortization             |       | 2,140                                          |       | 1,428 |   | (712 | ) | -49.9 | % |
| Selling,  General and Administrative       |       | 11,038                                         |       | 10,822 |   | (216 | ) | -2.0 | % |
| **Income from Operations**                 |       | $                                              | 2,992      |   | $ | 4,500 |   | $ | (1,508 | ) | -33.5 | % |
| Other  Income (Expenses):                  |       |                                           |       |   |   |   |   |   |   |
| Interest  Income                           |       | 1                                              |       | 54 |   | (53 | ) | -98.1 | % |
| Interest  Expense                          |       | (877                                           | )          | (817 | ) | (60 | ) | 7.3 | % |
| Foreign  Exchange Loss                     |       | (3                                             | )          | (2 | ) | (1 | ) | 50.0 | % |
| **Income before Income Taxes**             |       | $                                              | 2,113      |   | $ | 3,735 |   | $ | (1,622 | ) | -43.4 | % |
| less  Foreign Income Taxes                 |       | (14                                            | )          | (31 | ) | 17 |   | 54.8 | % |
| **Net Income**                             |       | $                                              | 2,099      |   | $ | 3,704 |   | $ | (1,605 | ) | -43.3 | % |
|                                       |       |                                           |       |   |   |   |   |   |   |
| **Earnings per Share:**                    |       |                                           |       |   |   |   |   |   |   |
| Basic                                      |       | $                                              | 0.24       |   | $ | 0.42 |   |   |   |   |   |
| Diluted                                    |       | $                                              | 0.23       |   | $ | 0.42 |   |   |   |   |   |
|                                       |       |                                           |       |   |   |   |   |   |   |
| **Balance Sheet:**                         |       |                                           |       |   |   |   |   |   |   |
|                                       |       |                                           |       |   |   |   |   |   |   |
| Total  Current Assets                      |       | $                                              | 5,730      |   | $ | 5,155 |   | $ | 575 |   | 11.2 | % |
| Total  Assets                              |       | $                                              | 53,668     |   | $ | 50,657 |   | $ | 3,011 |   | 5.9 | % |
| Total  Current Liabilities                 |       | $                                              | 11,113     |   | $ | 8,635 |   | $ | 2,478 |   | 28.7 | % |
| Long-term  Liabilities                     |       | $                                              | 7,040      |   | $ | 9,708 |   | $ | (2,668 | ) | -27.5 | % |
| Total  Stockholders’ Equity           |       | $                                              | 35,515     |   | $ | 32,314 |   | $ | 3,201 |   | 9.9 | % |

 

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(1)          In April 16,2009, TWC launched its newest operations, the Hotel Savannah, a 77-room,four-star deluxe hotel and a full-service spa, the Spa, both of which areconnected to the Company’s Route 59 casino. As the new operations began business in one of the worst economicclimates impacting the hospitality industry, the combined operations incurred asubstantial loss for 2009.  The additionof the new operations also served to increase depreciation and amortizationexpense for 2009.

 

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**Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations.**

 

**Forward-Looking Statements**

 

Information set forth in this discussion andanalysis contains various “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934. The Private Securities Litigation Reform Act of 1995 (the “Act”)provides certain “safe harbor” provisions for forward-looking statements.  All forward-looking statements made in thisAnnual Report on Form 10-K are made pursuant to the Act. The reader iscautioned that such forward-looking statements are based on informationavailable at the time and/or management’s good faith belief with respect tofuture events, and are subject to risks and uncertainties that could causeactual performance or results to differ materially from those expressed in thestatements.  Forward-looking statements speakonly as of the date the statement was made. We assume no obligation to update forward-looking information to reflectactual results, changes in assumptions or changes in other factors affectingforward-looking information. Forward-looking statements are typically identified by the use of termssuch as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,”“might,” “plan,” “predict,” “project,” “should,” “will,” and similar words,although some forward-looking statements are expressed differently. Although webelieve that the expectations reflected in such forward-looking statements arereasonable, we can give no assurance that such expectations will prove to becorrect.  Important factors that couldcause actual results to differ materially from expectations include thosefactors described in Item 1A, “Risk Factors” of this Annual Report on Form 10-K.

 

*You should read this discussion with the financial statements and otherfinancial information included in this report. Our significant accounting policies are described in Note 1 to theConsolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.*

 

**PerformanceMeasures and Indicators**

 

In discussing theconsolidated results of operations, we may use or refer to performance measuresand indicators that are common to the gaming industry, such as: (i) totaldrop, the dollar value of gaming chips purchased in a given period; (ii) dropper head (“DpH”), the per guest average dollar value of gaming chips purchased;(iii) slot revenue per head, the per guest average dollar value of revenuegenerated; (iv) our net win, the difference between gaming wagers and theamount paid out to patrons; (v) our win percentage (“WP”), the ratio ofnet win over total drop; and (vi) earnings before interest, taxes,depreciation and amortization (“EBITDA”). These measures are “non-GAAP financial measures.”

 

**Exchange Rates**

 

Due to the fact that the Company’s operations arelocated in Europe and principally in the Czech Republic, our financial resultsare subject to the influence of fluctuations in foreign currency exchangerates.  The revenue generated by ourCzech operations is generally denominated in EUR and the majority of theexpenses incurred by these facilities are generally denominated in localcurrency, the CZK.  As our primaryreporting subsidiary, ACC, is a Czech entity, all revenues and expenses,regardless of sources of origin (e.g. Croatia), are recognized in the Czechcurrency and translated to USD for reporting purposes.  A substantial change in the value of eitherof these currencies in relation to the value of the USD would have an impact onthe results from our operations when translated into USD.  We donot hedge our foreign currency holdings (see also “Item 7A - Quantitative andQualitative Disclosures about Market Risk”).

 

The actual 2009and 2008 operating results in local currency for the Czech casino units wereconverted to USD using the average of the daily exchange rates of each month inthe reporting periods.  As all of theGrand Casino Lav’s operating results, including revenues and expenses, arerecognized on the owner’s books, the foreign 

 

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currency exchange impactis limited to only our earned management fee income, which was not material forthe periods reviewed.  The monthlyaverage exchange rates for the CZK versus the USD and EUR, respectively, arepresented in the following graphical chart.

 

 

The balance sheet totals of our foreign subsidiaries at December 31,2009 were converted to USDs using the prevailing interbank exchange rates, asfound at www.oanda.com, which are depicted in the following table.

 
| **As Of**              | ** ** | **USD** | ** ** | **CZK** | ** ** | **EUR** | ** ** |
|------------------------|------------|---------|------------|---------|------------|---------|------------|
| December 31, 2009 |       | $       | 1.00       |    | 18.4379    |    | 0.6977     |   |
| December 31, 2008 |       | $       | 1.00       |    | 18.8606    |    | 0.7095     |   |

 

**Critical Accounting Policies**

 

Our management hasidentified the following as critical accounting policies that affect our consolidated financialstatements.

 

*Goodwill*

 

Goodwill represents theexcess of the cost of our Czech subsidiaries over the fair value of their netassets at the date of acquisition, which consisted of the Ceska and Rozvadovcasinos and the land in Hate (currently, the Route 59 Casino).  Goodwill is subject to at least an annualassessment for impairment, applying a fair-value based test.  We have allocated the goodwill over tworeporting units that are components of the operating segment “Czechsubsidiaries” and are classified as the “German reporting unit” which consistsof the Ceska and Rozvadov casinos and the “Austrian reporting unit” whichconsists of the Route 55, Route 59 and Hotel Savannah.  The impairment assessment requires that wecompare the fair value of our two reporting units to their respective carryingvalues to determine whether there is an indication that an impairmentexists.  The fair value of the tworeporting units were determined through a combination of recent appraisals of ourreal property and a multiple of EBITDA, which was based on our Company’sexperience and data from independent third parties.  As required, we performed the required annualfair-value based testing of the carrying value of goodwill related to our tworeporting units at September 30, 2009, and determined that goodwill wasnot impaired.  There were no indicatorsof impairment present during the fourth quarter of 2009, therefore wedetermined that there was no impairment of goodwill at December 31,2009.  We expect to perform our nextrequired annual assessment of goodwill during the third quarter of 2010.  (See also the Notes to the ConsolidatedFinancial Statements).

 

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**Results of Operations**

 

The following discussion andanalysis relates to our consolidated financial condition and results ofoperations for the years ended December 31, 2009 and 2008.

 

**Year Ended December 31, 2009 Compared to Year Ended December 31,2008**

 
| ** **                                                         | ** ** | **Year Ended December 31,** | ** ** | ** ** | ** ** | ** **          | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------|---------------------|------------|
| **(in thousands, except per share data)** | ** ** | **2009**                         | ** ** | **2008**   | ** ** | **Variance $** | ** ** | **Variance %** | ** ** |
|                                                               |       |                             |       |       |       |                |       |   |   |
| Total  revenues                                                    |       | $                                | 35,395     |       | $          | 36,424              |       | $ | (1,029 | ) | -2.8 | % |
| Total  operating costs and expenses                                |       | 32,403                           |       | 31,924     |       | 479                 |       | 1.5 | % |
| Income  from operations                                            |       | 2,992                            |       | 4,500      |       | (1,508              | )          | -33.5 | % |
| Other  expense                                                     |       | (879                             | )          | (765       | )          | (114                | )          | 14.9 | % |
| Net  Income                                                        |       | $                                | 2,099      |       | $          | 3,704               |       | $ | (1,605 | ) | -43.3 | % |
| Earnings  per common share:                                        |       |                             |       |       |       |                |       |   |   |
| Basic                                                              |       | $                                | 0.24       |       | $          | 0.42                |       |   |   |   |   |
| Diluted                                                            |       | $                                | 0.23       |       | $          | 0.42                |       |   |   |   |   |

 

For the year ended December 31, 2009, our revenues declined by2.8% or approximately $1.0 million on revenues of approximately $35.4 millionversus $36.4 million for the year ended December 31, 2008. The decline inrevenue was principally due to a 12.5% decrease in average DpH and a 0.6percentage point (“ppt”) reduction in WP. Despite a 5.5% improvement in livegame attendance, the lower DpH resulted from a combination of an increasing numberof younger players in the attendance mix, who historically have purchased fewerchips than more seasoned gamblers, as well as a reduction in the length andlevel of play of our regular players, which we attribute to the effects of theeconomic crisis in 2009.  The decline inrevenue was felt in the first and third quarter of 2009, but was, overall,partially offset by the incremental revenue generated by our newest operations,the Hotel Savannah and the Spa, which were launched in April 16, 2009.

 

Total operating costs and expenses are discussed in detail below.

 

Our resulting income from operations was approximately $3.0 million, a33.5% reduction from the $4.5 million achieved a year ago.

 

Our other expense increased by 14.9%, or $114,000, in 2009 versus theprior year due mainly to interest on a higher outstanding credit facility balanceof 165 million CZK in 2009, or approximately $9.0 million, versus a 150 millionCZK in 2008, or $8.1 million (See “Note 4 — Long-Term Debt” of the Notes to theConsolidated Financial Statements).  Theinterest rate on the debt was not a material factor in the increase for theperiods reviewed.  Furthermore, in 2009,we earned $53,000 less interest income as a result of lower bank cash balances,when compared with 2008.

 

We were also subject to foreign income taxes on non-gaming revenues,totaling approximately $14,000 in 2009, compared with $31,000 for 2008, areduction of 54.8% or $17,000, as a result of lower taxable, ancillary revenue,such as food, beverage, cigarettes and gift items.

 

As a result of the above, we incurred a 43.3%, or approximately $1.6million, reduction of net income, achieving a net income of approximately $2.1million for the year ended December 31, 2009 versus $3.7 million for theprior year.  The diluted earnings percommon share for the year 2009 was $0.23, a $0.19 decline to 2008’s dilutedearnings per common share.

 

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| ** **                           | ** ** | **For the Year Ended   December 31,** | ** ** | ** ** | ** ** | ** **     | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|------------|------------|----------------|------------|
| **(amounts in thousands)**           | ** ** | **2009**                                   | ** ** | **2008**   | ** ** | **Variance $** | ** ** | **Variance %** | ** ** |
|                                 |       |                                       |       |       |       |           |       |   |   |
| Cost  of revenues                    |       | $                                          | 19,225     |       | $          | 19,674         |       | $ | (449 | ) | -2.3 | % |
| Depreciation  and amortization       |       | 2,140                                      |       | 1,428      |       | 712            |       | 49.9 | % |
| Selling,  general and administrative |       | 11,038                                     |       | 10,822     |       | 216            |       | 2.0 | % |
| Total  operating costs and expenses  |       | $                                          | 32,403     |       | $          | 31,924         |       | $ | 479 |   | 1.5 | % |

 

Our total operating costs and expenses increased by 1.5% or $479,000,largely due to the following: (i) higher depreciation and amortizationexpense, which increased by 49.9% or $712,000 in 2009 versus the prior year asa result of the addition of the Hotel Savannah and the Spa in 2009; (ii) increaseof approximately 2.0% or $216,000 in year 2009 in comparison to those of 2008in selling, general and administrative expenses, primarily due to thecombination of expenses related to the Hotel Savannah and the Spa, which didnot exist in 2008, and for stock compensation expense of approximately $254,000in 2009 versus $149,000 for 2008, for the fair value of stock options awardedto certain key management employees(“KME”), which was recognized in selling, general and administrativeexpense.  These increases were partiallyoffset by the following: (i) a reduction in revenue-driven gaming taxesand lower payroll, contributed in part by a reduced operating week schedule atour Rozvadov casino; (ii) lower repair and maintenance expenses; and (iii) lowerutilities expense.  In 2009, our slotlease expenses were approximately $2,078 versus $1,777 in 2008, resulting fromthe addition of eight leased slot machines in 2009.

 

## **Unlike i**n US-based casinos, visitors to the TWC’s casinosare required, by Czech or Croatian law, to “check in” at the entrancereception, by presenting acceptable forms of picture identification, whicheffectively permits the Company to track the frequency of their visits and, toa limited extent, the duration of each visit.  As an incentive to increase gaming play time, the Company providescomplimentary drinks and a free food buffet to all of its playing guests.  In addition to these general amenities, TWCalso issues different classes of “loyalty” cards to customers who spendrelatively longer periods of time playing. These cards entitle the holder and aset number of the holder’s guests, depending on the card type, to variousadditional benefits.  The Company alsogrants certain other privileges to its VIP players, at the casino management’sdiscretion, such as opening a private gaming table, or extending the casino’soperating hours, and/or providing free hotel accommodations.  These loyalty cards are granted based on thefrequency of the player’s visits and the aggregate total drop for apre-determined number of visits.  Thecomplimentary food and beverage, cigarettes and cigars, and hotelaccommodations costs were recognized in the gaming departmental expenses, whichtotaled approximately $2.7 million or 7.9% of gaming revenues for the yearended December 31, 2009, versus $1.5 million or 4.3% of gaming revenues ayear ago, due mainly to higher competition to attract players.  General gifts and giveaways, which were alsorecognized in the gaming department, excluding personal gifts, represented$927,000 or 2.8% of gaming revenues for 2009, compared with $270,000 or 0.8% ofgaming revenues for 2008.

## ** **

Thepersonal gifts were booked as special promotion expenses in the marketingdepartment, and totaled approximately $110,000 for 2009, versus $149,000 for2008.

 

During the past three years, inflation has not been a factor that hasmaterially affected the Company’s operating results. We have generallyrecovered costs associated with any nominal inflation through price adjustmentsin our food and beverage and, beginning in 2010, we will attempt to do the samewith our hotel operation, should there be a need. However, primarily due tocompetitive market and other economic pressures, any such future increases incosts associated with our casino or hotel operations and maintenance of ourproperties may not be completely recovered by the Company.

 

**Our Business Units:**

 

***Ceska, Czech Republic***

 

For the year 2009, Ceskaposted a 5.4% revenue decline over 2008, due to a combination of a 7.4% and3.6% reductions in DpH and live games attendance, respectively, versus theprior year, which, in aggregate, was partially offset by a 5.2% improvement inslot revenue.  Operating expenses weredown by 7.8% versus the same period in 2008 due to lower volume-driven costs,such as gaming taxes.  Overhead expenseswere also down by 

 

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19.7%,largely from lower consulting fees and other professional services, serving toproduce a 35.8% improvement in the unit’s earnings.

 

***Rozvadov, Czech Republic***

 

In 2009, the unit benefitedfrom a shortened operating week schedule, closing Mondays and Tuesdays, excepton holidays and special events.  Theclosure of the two slowest days of the casino operation served to reduceoperating costs on slow revenue days and concentrated the attendance andrevenues on those days in which the casino was opened for business.  Consequently, operating and overhead costswere down by 32.1% and 37.1%, respectively, when compared to 2008, contributingto a 70.4% unit earnings’ improvement.

 

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

 

Attendance in live games and slot games surged 19.2%and 10.4%, respectively, ahead of last year. However, the DpH was off 23.0% from 2008, mainly due to an increasingnumber of younger players in the attendance mix who have historically boughtfewer chips, as well as a reduction in the length and level of play by itsregular players, which we attribute to the effects of the worldwide recession.   The casino benefited from the launch andoperation of Hotel Savannah and the Spa, which opened on April 16, 2009,which helped to attract new business to the casino and hotel complex.  However, in addition to a lower DpH, Route 59incurred a 2.6 ppts reduction in WP, from a higher proportion of live game winsby regular players, thereby contributing to a 10.7% reduction in totalrevenue.  Although operating and overheadcosts were 1.4% and 14.0% lower, respectively, than last year, the revenueshortfall led to a 40.2% decline in unit earnings, when compared to 2008.

 

***Route 55, Czech Republic***

 

Route 55 posted 3.1% and 18.7% improvements in livegame and slot game attendances, respectively. Total revenue missed last year’s by only 0.7%, largely due to a 17.4%reduction in slot revenue per head, despite the substantial attendanceincrease.  Versus 2008, the unit reducedits operating and overhead expenses by 3.9% and 16.5%, respectively.  The savings were aided by a substantial utilitiesexpense savings, resulting from better utilities resource management, whencompared with 2008.  Consequently, Route55 achieved a 11.7% improvement in unit earnings.

 

***Grand Casino Lav, Croatia***

** **

As the Grand Casino Lavis situated near a major resort city, Split, the worldwide economic crisisnegatively impacted its leisure and tourism market, upon which the operationdepends.  In addition, despite theefforts of local management to improve operations and control costs, the lackof owner funding devoted to marketing initiatives resulted in limited growth inthe casino’s revenues for the reported year. We earned management fees of approximately $145,000 in 2009, versus$208,000 earned in the prior year.

 

***Hotel Savannah and the Spa***

 

On January 14, 2009, tocomplement our Route 59 casino, we opened our newest operating unit, HotelSavannah, a 77-room, European four-star deluxe hotel.  The official launch was followed on April 16,2009 with a gala grand opening of both the hotel and the Spa, which is a full-servicespa operation that includes a large indoor pool.  The hotel, which is connected to our Route 59casino, also features banquet halls for conference meetings and special eventsas well as a full-service restaurant and bar. The Spa is attached to our hotel and its Ayurvedic massage therapyprogram is operated by a contractor, who pays us revenue-based fees.  In March 2009, Hotel Savannah, incooperation with Route 59, hosted the 2009 Miss Austria Beauty Pageant ontheir premises.  The high-profile eventwas televised in Austria and highly publicized through various media outlets.

 

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**Liquidity and Capital Resources**

 

At December 31,2009, we had a working capital deficit of approximately $5.4 million versus aworking capital deficit of approximately $3.5 million at December 31,2008.  This deficit increase for the yearended December 31, 2009 was primarily due to the following main factors: (i) thereclassification of approximately $1.6 million and $141,000 from long-term debtto short-term debt, as a result of the June 30, 2010 maturity date on theCompany’s 2003 unsecured promissory notes, and their associated six-monthinterest that was deferred pursuant to the terms of the notes, respectively; (ii) theweaker earnings achieved in the last quarter of 2009 versus the same quarter in2008; (iii) the addition of a spa (the “Spa”) to the Route 59 — HotelSavannah hotel complex, whose construction costs, funded by cash fromoperations, were approximately $1.7 million; and (iv) the recognition ofapproximately $2.0 million, representing the current maturities portion of thenew Commerzbank Aktiengesellschaft, pobočka Praha (“Commerzbank”) loanfacility and credit line (see details below).

 

In February 2009,we exercised our option to extend the terms of the Commerzbank revolving creditfacility for an additional 12 months, to July 23, 2010, with all the bank’sprovisions, including the rate of interest, remaining constant, with theexception of an additional pledge as a result of concerns over a deterioratingworldwide economy and the possible impact on the Company’s originalsecurity.  Thus, as a further assurance toCommerzbank, we pledged, as additional collateral, our Route 59 casino’soriginal building and corresponding underlying land, excluding the buildingextension.

 

In November 2009,we restructured our Commerzbank long-term debt with a new credit facility fromCommerzbank.  The new credit facilityallowed us to retire our existing revolving credit facility and replace it witha combination of a long-term loan and a new smaller revolving credit line.  The credit facility is provided in twotranches: a 4-year term loan of CZK 125 million (or approximately $6.8 millionat the December 31, 2009 exchange rate), with quarterly interest based onthe three-month Prague Interbank Offered Rate (“PRIBOR”) plus 500 basis points,and a two-year revolving credit line of CZK 40 million (or approximately $2.2million at the same exchange rate) with interest based on, depending on eachdraw request, the one, two, three or six-month PRIBOR plus 400 basis points,with the Company’s option to renew the term for one-year.  The revolving credit line will be reduced toCZK 35 million (or approximately $1.9 million at the same exchange rate) after12 months from the signing date.  Thecredit line was fully drawn down at December 31, 2009.  The new credit facilities include financial covenants,security and requirements, which notably include: (i) a mandatory annualprepayment  that requires that 25% of theborrower’s excess cash above a certain annually-escalating bank balance at theend of each fiscal year be applied toward the term loan’s principal balance; (ii) thepledge of the Route 59 and Route 55 casinos and other guarantees as security;and (iii) the term loan to be repaid quarterly in equal principalinstallments, with the applicable interest based on the three-month PRIBOR rateplus the said basis points.  The loanmatures on November 4, 2013.

 

Our Company’s management believes that our cashresources at December 31, 2009, in addition to the anticipated cash to beprovided by existing operations and the restructuring of the new Commerzbankcredit facility, will be sufficient to meet current obligations and fund ouroperating activities for the next twelve months.  However, should cash from operations and theadditional credit be insufficient to cover these objectives, we may seek toraise additional capital in order to fund our current liabilities, operationsand growth strategies.  There is noguarantee that such funds will be available to us at favorable terms or at all,in which case we may decide to reduce our development plans and oroperations.  We have no other majorcapital expenditures or plans for the next twelve months.  We are in full compliance with the creditfacility’s financial covenants up to and including the year ended December 31,2009. (See also “Note 4 — Long Term Debt”).

 

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Weare also obligated under various contractual commitments over the next threeyears.  Our management believes thatTWC’s cash resources at December 31, 2009 and anticipated cash to beprovided by 2010 operations will be sufficient to fund our activities for theyear ending December 31, 2010.  Thefollowing is a summary of our five-year commitments as of December 31,2009:

 
| **(in  thousands)****Contractual Obligations** | ** ** | **Total** | ** ** | **Less than  1 Year** | ** ** | **1-3 Years** | ** ** | **3-5 Years** | ** ** | **More than  5 Years** | ** ** |
|------------------------------------------------|------------|-----------|------------|-----------------------|------------|---------------|------------|---------------|------------|------------------------|------------|
|                                           |       |      |       |                  |       |          |       |          |       |                   |       |
| Long-term,  unsecured debt, U.S.               |       | $         | 1,550      |                  | $          | 1,550         |       | $             | —     |                   | $          | — |   | $ | — |   |
| Long-term,  secured debt, foreign              |       | 8,954     |       | 1,971                 |       | 6,983         |       |          |       |                   |       |
| Operating  and capital leases                  |       | 439       |       | 109                   |       | 135           |       | 78            |       | 117                    |       |
| Employment  agreements                         |       | 450       |       | 450                   |       | —        |       |          |       |                   |       |
|                                           |       |      |       |                  |       |          |       |          |       |                   |       |
| Total  contractual obligations                 |       | $         | 11,393     |                  | $          | 4,080         |       | $             | 7,118      |                   | $          | 78 |   | $ | 117 |   |

 

The Company has nooff-balance sheet arrangements.

 

**Our Plan of Operations**

 

Wewill continue to develop and refine our marketing and operational strategiesdesigned to increase attendance and revenues at our existing locations in theCzech Republic while striving to minimize costs, through cost-sharing allianceswith non-competing businesses, where advantageous.  We will also employ this formula in the Grand CasinoLav, our managed casino in Split, Croatia in an effort to build a solidcustomer base from the local and regional markets.  Furthermore, we willplace additional focus on developing and refining marketing strategies thatwill specifically target the significant summer tourist market in thatregion.  With respect to our newestoperation, Hotel Savannah, we are utilizing the synergy of both gaming and hospitalityresources to lower operating costs and improve profitability.

 

**Item 7A.****Quantitative andQualitative Disclosures about Market Risk.**

 

Market risk is the riskof loss arising from adverse changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices.  TWC does not maintain any instruments in atrading portfolio.

 

**InterestRate Risk**

 

The interest rate on themajority portion of our debt, approximately $9.0 million of theCommerzbank credit facility at December 31, 2009, is subject tofluctuations of the PRIBOR short-term interest rates.  The credit facility was provided in twotranches: an amortized, 4-year term loan of CZK 125 million (or approximately$6.8 million at the December 31, 2009 exchange rate), with interest basedon the three-month PRIBOR plus 500 basis points, and a two-year, revolvingcredit line of CZK 40 million (or approximately $2.2 million at the sameexchange rate), with interest based on, depending on each draw request, the one,two, three or six-month PRIBOR plus 400 basis points.  Therefore, interest expense could increase asa result of this factor.  Based on a 1%movement in weighted average interest rate on the outstanding full balance ofthe credit facility would result in an approximate $88,000 annualized increaseor decrease in our interest expense.  Wehave not in the past and do not currently engage in interest-rate swapagreements or other types of interest-rate hedging activities. Our Company’smanagement evaluates our exposure to market risk by monitoring interest ratesin the marketplace to determine the best course of action, if needed.

 

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**ForeignCurrency Exchange Rate Risk**

 

The information in thissection should be read in conjunction with information related to changes inthe exchange rates of foreign currency in “Part I, Item 1A. Risk Factors.”  Changes in foreign currency exchange ratescould materially adversely affect our consolidated results of operations orfinancial condition.

 

Due to the fact that our operations are all locatedoverseas, our overall results are subject to the impact of fluctuations inforeign currency exchange (“FX”) rates. Pursuant to the January 2002 adoption of the EUR as the soletrading currency by all European Union member nations that had previously tiedtheir local currencies to it, our operations conducted business in EURs andCZKs for the Czech units and EURs and Croatian Kunas for the Croatianunit.  As our primary reportingsubsidiary, ACC, is a Czech entity, all revenues and expenses, regardless ofsources of origin (e.g., Croatia), are recognized in the Czech currency andtranslated to USD for reporting purposes.

 

Based on our sensitivity analysis, as of the yearended December 31, 2009, we determined that hypothetical 10% movements inthe two functional currencies, the CZK, when converted to the USD, and the EUR,when converted to the CZK, would result in the following changes to our resultsof operation:

 

·                 A hypothetical10% strengthening of the USD to the CZK would decrease our results of operationby an approximate $400,000;

 

·                 A hypothetical10% weakening of the USD to the CZK would increase our results of operation byan approximate $500,000;

 

·                 A hypothetical10% strengthening of the EUR to the CZK would increase our results of operationby an approximate $2.7 million; and

 

·                 A hypothetical10% weakening of the EUR to the CZK would decrease our results of operation byan approximate $2.7 million.

 

In real world situations, the impact of the FX on our results ofoperation would be positive or negative, depending on the combination, thevariability and intensity of the above probabilities, coupled with the strengthof the correlation of the functional currencies to the USD, among other factors  We have not in the past and do notcurrently hedge our currency holdings or transactions.

 

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**Item 8.****Financial Statements and Supplemental Data.**

 

Thefollowing items are included in this Report:

 

ConsolidatedFinancial Statements

 
| Report  of Independent Registered Public Accounting Firm                                                  | 24    |
|-----------------------------------------------------------------------------------------------------------|-------|
| Consolidated  Balance Sheets, December 31, 2009 and 2008                                             | 25    |
| Consolidated  Statements of Income and Comprehensive Income, Years Ended December 31,  2009 and 2008 | 26    |
| Consolidated  Statements of Stockholders’ Equity, Years Ended December 31, 2009 and  2008       | 27    |
| Consolidated Statements of Cash Flows, Years Ended  December 31, 2009 and 2008                       | 28    |
| Notes to Consolidated Financial Statements                                                                | 29-47 |

 

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

Tothe 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, 2009 and 2008, 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 audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audits to obtain reasonable assurance about whether thefinancial 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 the effectivenessof the Company’s internal control over financial reporting. Accordingly, weexpress no such opinion.  An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Trans World Corporation and Subsidiaries as of December 31,2009 and 2008, and the results of their operations and their cash flows foreach of the years then ended, in conformity with accounting principlesgenerally accepted in the United States of America.

 

 

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

 

 

Roseland,New JerseyMarch 9, 2010

 

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###### **TRANS WORLD CORPORATION ANDSUBSIDIARIES**

CONSOLIDATED BALANCE SHEETS

December 31, 2009 and 2008

(in thousands, except forshare data)

 
| ** **                                                                                                                          | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **ASSETS**                                                                                                                          | ** ** |
| **CURRENT  ASSETS:**                                                                                                                | ** ** | ** **                 | ** ** | ** **                 | ** ** |
| Cash                                                                                                                                |       | $                          | 2,582      |                       | $          | 3,676 |   |
| Prepaid  expenses                                                                                                                   |       | 1,026                      |       | 886                        |       |
| Notes  receivable, current portion                                                                                                  |       | 225                        |       | 225                        |       |
| Other  current assets                                                                                                               |       | 1,897                      |       | 368                        |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total current assets**                                                                                                            |       | 5,730                      |       | 5,155                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **PROPERTY AND EQUIPMENT**, less accumulated depreciation of****$9,316 and $7,580, respectively                                     |       | 38,203                     |       | 35,839                     |       |
|                                                                                                                                |       |                       |       |                       |       |
| **OTHER ASSETS:**                                                                                                                   |       |                       |       |                       |       |
| Goodwill                                                                                                                            |       | 6,577                      |       | 6,430                      |       |
| Notes  receivable, less current portion                                                                                             |       | 1,309                      |       | 1,160                      |       |
| Deposits  and other assets                                                                                                          |       | 1,849                      |       | 2,073                      |       |
| ** **                                                                                                                          |       |                       |       |                       |       |
| **Total other assets**                                                                                                              |       | 9,735                      |       | 9,663                      |       |
| ** **                                                                                                                          |       |                       |       |                       |       |
| ** **                                                                                                                          |       | $                          | 53,668     |                       | $          | 50,657 |   |
| ** **                                                                                                                          |       |                       |       |                       |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **CURRENT LIABILITIES:**                                                                                                            |       |                       |       |                       |       |
| Long-term  debt, current maturities                                                                                                 |       | $                          | 3,521      |                       | $          | 175 |   |
| Capital  lease, current portion                                                                                                     |       | 50                         |       | 282                        |       |
| Accounts  payable                                                                                                                   |       | 1,206                      |       | 4,043                      |       |
| Interest  payable                                                                                                                   |       | 218                        |       | 78                         |       |
| Czech  tax accrual                                                                                                                  |       | 4,459                      |       | 2,596                      |       |
| Accrued  expenses and other current liabilities                                                                                     |       | 1,659                      |       | 1,461                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total current liabilities**                                                                                                       |       | 11,113                     |       | 8,635                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **LONG-TERM LIABILITIES:**                                                                                                          |       |                       |       |                       |       |
| Long-term  debt, less current maturities                                                                                            |       | 6,983                      |       | 9,503                      |       |
| Capital  lease, less current portion                                                                                                |       | 57                         |       | 64                         |       |
| Other  long-term liabilities                                                                                                        |       | —                     |       | 141                        |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total long-term liabilities**                                                                                                     |       | 7,040                      |       | 9,708                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                   |       |                       |       |                       |       |
|                                                                                                                                |       |                       |       |                       |       |
| **STOCKHOLDERS’ EQUITY:**                                                                                                      |       |                       |       |                       |       |
| ** **                                                                                                                          |       |                       |       |                       |       |
| Preferred  stock, $.001 par value, 4,000,000 shares authorized, none issued                                                         |       |                       |       |                       |       |
| Common  stock, $.001 par value, 20,000,000 shares authorized, 8,871,640 and 8,859,140  shares, issued and outstanding, respectively |       | 9                          |       | 9                          |       |
| Additional  paid-in capital                                                                                                         |       | 51,710                     |       | 51,358                     |       |
| Accumulated  other comprehensive income                                                                                             |       | 9,083                      |       | 8,333                      |       |
| Accumulated  deficit                                                                                                                |       | (25,287                    | )          | (27,386                    | )          |
| ** **                                                                                                                          |       |                       |       |                       |       |
| **Total stockholders’ equity**                                                                                                 |       | 35,515                     |       | 32,314                     |       |
|                                                                                                                                |       |                       |       |                       |       |
|                                                                                                                                |       | $                          | 53,668     |                       | $          | 50,657 |   |

 

*See accompanying notes toconsolidated financial statements*

 

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OFINCOMEAND COMPREHENSIVE INCOME

Years Ended December 31,2009 and 2008

(in thousands, except forshare data)

 
| ** **                                                                                       | ** ** | **Years Ended December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                       | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| ** **                                                                                       |       |                              |       |   |   |
| **REVENUES**                                                                                     |       | $                                 | 35,395     |   | $ | 36,424 |   |
| ** **                                                                                       |       |                              |       |   |   |
| **OPERATING EXPENSES:**                                                                          |       |                              |       |   |   |
| Cost  of revenues                                                                                |       | 19,225                            |       | 19,674 |   |
| Depreciation  and amortization                                                                   |       | 2,140                             |       | 1,428 |   |
| Selling,  general and administrative                                                             |       | 11,038                            |       | 10,822 |   |
|                                                                                             |       | 32,403                            |       | 31,924 |   |
|                                                                                             |       |                              |       |   |   |
| **INCOME FROM OPERATIONS**                                                                       |       | 2,992                             |       | 4,500 |   |
| ** **                                                                                       |       |                              |       |   |   |
| **OTHER INCOME (EXPENSES):**                                                                     |       |                              |       |   |   |
| Interest  income                                                                                 |       | 1                                 |       | 54 |   |
| Interest  expense                                                                                |       | (877                              | )          | (817 | ) |
| Foreign  exchange loss                                                                           |       | (3                                | )          | (2 | ) |
|                                                                                             |       | (879                              | )          | (765 | ) |
|                                                                                             |       |                              |       |   |   |
| **INCOME BEFORE FOREIGN INCOME TAXES**                                                           |       | 2,113                             |       | 3,735 |   |
| ** **                                                                                       |       |                              |       |   |   |
| Foreign  income taxes                                                                            |       | (14                               | )          | (31 | ) |
| ** **                                                                                       |       |                              |       |   |   |
| **NET INCOME**                                                                                   |       | 2,099                             |       | 3,704 |   |
| ** **                                                                                       |       |                              |       |   |   |
| **Other comprehensive income (loss)**, foreign currency****translation adjustments, net of taxes |       | 750                               |       | (1,620 | ) |
| ** **                                                                                       |       |                              |       |   |   |
| **TOTAL COMPREHENSIVE INCOME**                                                                   |       | $                                 | 2,849      |   | $ | 2,084 |   |
| ** **                                                                                       |       |                              |       |   |   |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**                                                  |       |                              |       |   |   |
| Basic                                                                                            |       | 8,870,270                         |       | 8,851,480 |   |
| Diluted                                                                                          |       | 8,955,906                         |       | 8,873,353 |   |
| ** **                                                                                       |       |                              |       |   |   |
| **EARNINGS PER COMMON SHARE:**                                                                   |       |                              |       |   |   |
| Basic                                                                                            |       | $                                 | 0.24       |   | $ | 0.42 |   |
| Diluted                                                                                          |       | $                                 | 0.23       |   | $ | 0.42 |   |

 

*See accompanying notes toconsolidated financial statements*

 

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OFSTOCKHOLDERS’ EQUITY

Years Ended December 31,2009 and 2008(in thousands, except for share data)

 
| ** **                                              | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Accumulated** | ** ** | **Total  Stockholders’** | ** ** |
|---------------------------------------------------------|------------|------------------|------------|-------------------------|------------|---------------------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **                                              | ** ** | **Shares**       | ** ** | **Amount**              | ** ** | **Capital**                           | ** ** | **Income**      | ** ** | **Deficit**                   | ** ** | **Equity** | ** ** |
| **Balances,**January 1,  2008                      |       | 8,840,870        |       | $                       | 9          |                                  | $          | 51,147          |       | $                             | 9,953      |   | $ | (31,090 | ) | $ | 30,019 |   |
| **Residual costs, Private placement**                   |       |             |       |                    |       | (8                                    | )          |            |       |                          |       | (8 | ) |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Warrants exercise**                                   |       | 5,754            |       |                    |       | 6                                     |       |            |       |                          |       | 6 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Stock options expense**                               |       |             |       |                    |       | 149                                   |       |            |       |                          |       | 149 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Stock issuance as compensation**                      |       | 12,500           |       |                    |       | 36                                    |       |            |       |                          |       | 36 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Deferred bonuses to be paid in stock**                |       |             |       |                    |       | 18                                    |       |            |       |                          |       | 18 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Deferred board fees to be paid in stock**             |       |             |       |                    |       | 10                                    |       |            |       |                          |       | 10 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Foreign currency translation adjustment, net of tax** |       |             |       |                    |       |                                  |       | (1,620          | )          |                          |       | (1,620 | ) |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Retirement of fractional shares**                     |       | 16               |       |                    |       |                                  |       |            |       |                          |       |   |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Net income**                                          |       |             |       |                    |       |                                  |       |            |       | 3,704                         |       | 3,704 |   |
| **Balances**,  December 31, 2008                   |       | 8,859,140        |       | $                       | 9          |                                  | $          | 51,358          |       | $                             | 8,333      |   | $ | (27,386 | ) | $ | 32,314 |   |
| **Stock options expense**                               |       |             |       |                    |       | 238                                   |       |            |       |                          |       | 238 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Stock issuance as compensation**                      |       | 12,500           |       |                    |       | 40                                    |       |            |       |                          |       | 40 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Warrants issuance as compensation**                   |       |             |       |                    |       | 16                                    |       |            |       |                          |       | 16 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Deferred bonuses to be paid in stock**                |       |             |       |                    |       | 48                                    |       |            |       |                          |       | 48 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Deferred board fees to be paid in stock**             |       |             |       |                    |       | 10                                    |       |            |       |                          |       | 10 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Foreign currency translation adjustment, net of tax** |       |             |       |                    |       |                                  |       | 750             |       |                          |       | 750 |   |
| ** **                                              |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Net income**                                          |       |             |       |                    |       |                                  |       |            |       | 2,099                         |       | 2,099 |   |
| **Balances**,  December 31, 2009                   |       | 8,871,640        |       | $                       | 9          |                                  | $          | 51,710          |       | $                             | 9,083      |   | $ | (25,287 | ) | $ | 35,515 |   |

 

*See accompanying notes toconsolidated financial statements*

 

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OFCASH FLOWS

Years Ended December 31,2009 and 2008(in thousands, except for share data)

 
| ** **                                                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                         |       |     |       |     |       |
| Net income                                                                         |       | $        | 2,099      |     | $          | 3,704 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |     |       |     |       |
| Depreciation and amortization                                                      |       | 2,140    |       | 1,428    |       |
| Stock-based compensation expense                                                   |       | 238      |       | 149      |       |
| Stock issued for services                                                          |       | 40       |       | 36       |       |
| Warrants issued for services                                                       |       | 16       |       |     |       |
| Deferred compensation to be paid as stock                                          |       | 58       |       | 28       |       |
| Loss from sale of assets                                                           |       |     |       | (113     | )          |
| Changes in operating assets and liabilities:                                       |       |     |       |     |       |
| Prepaid expenses and other current assets                                          |       | (1,441   | )          | (14      | )          |
| Deposits and other assets                                                          |       | 60       |       | (632     | )          |
| Accounts payable                                                                   |       | (2,823   | )          | 501      |       |
| Interest payable                                                                   |       |     |       |     |       |
| Czech tax accrual                                                                  |       | 1,742    |       | (718     | )          |
| Accrued expenses and other current liabilities                                     |       | (69      | )          | 227      |       |
| **NET CASH PROVIDED BY OPERATING  ACTIVITIES**                                     |       | 2,060    |       | 4,596    |       |
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                         |       |     |       |     |       |
| Renovation and purchases of property and equipment                                 |       | (330     | )          | (436     | )          |
| Repayment on notes receivable                                                      |       | 37       |       | 177      |       |
| Investment into Hotel Savannah construction                                        |       | (2,738   | )          | (12,427  | )          |
| Proceeds from sale of assets                                                       |       |     |       | 187      |       |
| **NET CASH USED IN INVESTING  ACTIVITIES**                                         |       | (3,031   | )          | (12,499  | )          |
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                         |       |     |       |     |       |
| Proceeds from loan and credit facilities                                           |       | 786      |       | 3,509    |       |
| Payments of long-term debt                                                         |       | (177     | )          | (219     | )          |
| Payments of issuance costs                                                         |       |     |       | (8       | )          |
| Proceeds from warrants exercise                                                    |       | 1        |       | 6        |       |
| **NET CASH PROVIDED BY FINANCING  ACTIVITIES**                                     |       | 610      |       | 3,288    |       |
|                                                                               |       |     |       |     |       |
| **EFFECT OF EXCHANGE RATE CHANGES ON  CASH**                                       |       | (733     | )          | (24      | )          |
|                                                                               |       |     |       |     |       |
| **NET DECREASE IN CASH**                                                           |       | (1,094   | )          | (4,639   | )          |
|                                                                               |       |     |       |     |       |
| **CASH:**                                                                          |       |     |       |     |       |
| Beginning of year                                                                  |       | 3,676    |       | 8,315    |       |
|                                                                               |       |     |       |     |       |
| End of year                                                                        |       | $        | 2,582      |     | $          | 3,676 |   |
|                                                                               |       |     |       |     |       |
| **SUPPLEMENTAL DISCLOSURES OF CASH  FLOW INFORMATION:**                            |       |     |       |     |       |
| Cash paid during the year for interest                                             |       | $        | 862        |     | $          | 814 |   |
|                                                                               |       |     |       |     |       |
| **SUPPLEMENTAL SCHEDULE OF NON-CASH  INVESTING ACTIVITIES:**                       |       |     |       |     |       |
| Property and equipment acquired via accounts  payable                              |       | $        | 1          |     | $          | 3,008 |   |

 

*See accompanying notes toconsolidated financial statements*

 

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**TRANS WORLD CORPORATION ANDSUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands,except for statistics and share data)

 

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

 

***Nature of Business***

 

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

 

TheCompany owns and operates four casinos in the Czech Republic (“CZ”), andmanages, under contract, one casino and nightclub in Croatia, under theAmerican Chance Casinos (“ACC”) brand. Two of the Czech casinos are located in the western part of the CZ,close to the border of Germany.  Thelarger of the two, located in Ceska Kubice (“Ceska”), currently has 15 gamingtables and 80 slot machines. The smaller, Rozvadov (“Rozvadov”), located in thetown of Rozvadov, currently has 8 gaming tables and 20 slot machines.  The other two Czech casinos are located inthe southern part of the CZ, close to the Austrian border.  The larger of these two, “Route 55,” locatedin Dolni Dvoriste, now has 23 gaming tables and 124 slot machines.  The other casino, “Route 59,” which recentlyunderwent major building expansion and renovation work, is located in Hate,near Znojmo, and currently has 25 gaming tables and 114 slot machines.

 

The Company also managedunder contract the Grand Casino Lav and Nightclub (collectively known as the “GrandCasino Lav”), located in Podstrana, Croatia, near the resort city ofSplit.  The management agreement with GrandHotel Lav d.o.o., the property owner, provides for a 10-year term expiring in2017, with renewal periods of five (5) years at TWC’s option, subject tocertain performance conditions.   Inaddition to marketing to the existing hotel guests, the Company will target thelocal market of Split, the second largest city in Croatia. Grand Casino Lavcurrently has 18 tables and 60 slot machines.

 

Despite the efforts of local management to improveoperations and control costs, the lack of owner funding devoted to marketinginitiatives forced the Grand Casino Lav to rely on its own self-generatedresources, and, as a result, the casino saw limited growth in revenues for thereported year. Thus, its management fee income’s contribution to the year 2009operational results was not material. Consequently, all discussions of operational performance and resultsherein are limited to the Company’s fully-owned and operated units in the CzechRepublic.

 

***Liquidity***

 

At December 31,2009, the Company had a working capital deficit of $5,383 versus a workingcapital deficit of $3,480 at December 31, 2008.  This deficit increase for the year ended December 31,2009 was primarily due to the following main factors: (i) thereclassification of $1,550 and $141 from long-term debt to short-term debt, asa result of the one-year maturity date remaining on the Company’s 2003unsecured promissory notes, and their associated six-month interest that wasdeferred pursuant to the terms of the notes, respectively; (ii) the weakerearnings achieved in the last quarter of 2009 versus the same quarter in 2008; (iii) theaddition of a spa (the “Spa”) to the Route 49 - Hotel Savannah complex, whoseconstruction costs was funded by cash from operations, of approximately $1,700;and (iv) the recognition of approximately $1,971 representing the currentmaturities portion of the new Commerzbank Aktiengesellschaft, pobočkaPraha (“Commerzbank”) loan facility  andcredit line (see details below).

 

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In February 2009,TWC exercised its option to extend the terms of the Commerzbank revolvingcredit facility for an additional 12 months, to July 23, 2010, with all ofthe bank’s provisions, including the rate of interest, remaining constant, withthe exception of an additional pledge as a result of concerns over adeteriorating worldwide economy and the possible impact on the Company’soriginal security.  Thus, as a furtherassurance to Commerzbank, TWC pledged, as additional collateral, its Route 59casino’s original building and corresponding underlying land, excluding thebuilding extension.

 

In November 2009,the Company restructured its Commerzbank long-term debt with a new creditfacility from Commerzbank.  The newcredit facility allows the Company to retire its existing revolving creditfacility and replace it with a combination of a long-term loan and a newsmaller revolving credit line.  Thecredit facility is provided in two tranches: a 4-year term loan of Czeck Koruna(“CZK”) 125,000 (or approximately $6,783 at the December 31, 2009 exchangerate) with quarterly interest based on the three-month Prague Interbank OfferedRate (“PRIBOR”) plus 500 basis points, and a two-year, revolving credit line ofCZK 40,000 (or approximately $2,169 at the same exchange rate),with interestbased on, depending on each draw request, the one, two, three or six-monthPRIBOR plus 400 basis points, with the Company’s option to renew the term forone-year.  The revolving credit line willbe reduced to CZK 35,000 (or approximately $1,898 at the same exchange rate)after 12 months from the signing date. The credit facility was fully drawn down at December 31, 2009.  The new credit facilities include financialcovenants, security and requirements, which notably include: (i) amandatory annual prepayment  thatrequires that 25% of the borrower’s excess cash above a certainannually-escalating bank balance at the end of each fiscal year be appliedtoward the term loan’s principal balance; (ii) the pledge of the Route 59and Route 55 casinos and other guarantees as security; and (iii) the termloan to be repaid quarterly in equal principal installments, with theapplicable interest based on three-month PRIBOR rate plus the said basispoints.

 

The Company’s managementbelieves that its cash resources at December 31, 2009, in addition to theanticipated cash to be provided by existing operations and the restructuring ofthe new Commerzbank credit facility, will be sufficient to meet currentobligations and fund its operating activities for the next twelve months.  However, should cash from operations and theadditional credit be insufficient to cover these objectives, the Company mayseek to raise additional capital in order to fund its current liabilities,operations and growth strategies.  Thereis no guarantee that such funds will be available to TWC at favorable terms orat all, in which case the Company may decide to reduce its development plans andor operations.  The Company has no othermajor capital expenditures or plans for the next twelve months.  The Company is in full compliance with thecredit facility’s financial covenants up to and including the year ended December 31,2009.  (See also “Note 4 — Long-TermDebt,” below).

 

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

 

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

 

Thesefinancial statements were approved by management and the Board of Directors andavailable for issuance on March 9, 2010. Subsequent events have been evaluated through this date.

 

***Property and Equipment***** **- Property and equipment is stated at cost lessaccumulated depreciation and amortization. TWC capitalizes the cost of improvements that extend the life of theasset and expenses 

 

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maintenanceand repair costs as incurred.  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                |       |
| Furniture, fixtures and other equipment |       | 4-12 years                |       |

 

***Preopening Costs***** **-  Preopening costs are expensed as incurredpursuant to proper accounting for the reporting on the costs of start-upactivities.

 

***Goodwill ***- Goodwillrepresents the excess of the cost of the Company’s Czech subsidiaries over thefair value of their net assets at the date of acquisition, which consisted ofthe Ceska and Rozvadov casinos and the land in Hate (currently, the Route 59Casino).  Goodwill is subject to at leastan annual assessment for impairment, applying a fair-value based test.  The Company has allocated the goodwill overtwo reporting units that are components of the operating segment “Czechsubsidiaries” and are classified as the “German reporting unit” which consistsof the Ceska and Rozvadov casinos and the “Austrian reporting unit” whichconsists of the Route 55, Route 59 and Hotel Savannah.  The impairment assessment requires theCompany to compare the fair value of its two reporting units to theirrespective carrying values to determine whether there is an indication that animpairment exists.  The fair value of thetwo reporting units were determined through a combination of recent appraisalsof the Company’s real property and a multiple of earnings before interest,taxes, depreciation and amortization (“EBITDA”), which was based on the Company’sexperience and data from independent third parties.  As required, the Company performed itsrequired annual fair-value based testing of the carrying value of goodwillrelated to its two reporting units at September 30, 2009, and determinedthat goodwill was not impaired.  Therewere no indicators of impairment present during the fourth quarter of 2009,therefore TWC determined that there was no impairment of goodwill at December 31,2009.  The Company expects to perform itsnext required annual assessment of goodwill during the third quarter of 2010.

 

***ComprehensiveIncome (Loss)*****—**TheCompany complies with requirements for reporting comprehensive income.  Those requirements establish rules forreporting and display of comprehensive income and its components.  Furthermore, they require the Company’schange in the foreign currency translation adjustments to be included in othercomprehensive income.

 

***ForeignCurrency Translation* **- TheCompany complies with requirements for reporting foreign currency translation,which require that for foreign subsidiaries whose functional currency is thelocal foreign 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.

 

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The impact of foreigncurrency translation on goodwill is presented below:

 
| ** **                                                                                         | ** ** | **Applicable**                 | ** ** | ** **                 | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|----------------------------|------------|---------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                                         | ** ** | **Foreign  Exchange**          | ** ** | **Goodwill**               | ** ** |
| **As of December 31, 2009 (in  thousands, except FX)**                                             | ** ** | **Rate  (“FX”) (2)** | ** ** | **German  reporting unit** | ** ** | **Austrian reporting unit** | ** ** |
| ** **                                                                                         | ** ** | ** **                     | ** ** | ** **                 | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Residual  balance, as of January 1, 2003 (in USD) (1)                                         |       |                           |       | USD                        |       | 3,042                                 |       | USD        |       | 537        |       |
|                                                                                               |       |                           |       |                       |       |                                  |       |       |       |       |       |
| USD  residual balance (A), translated at June 30, 1998 (date of acquisition),  at FX rate of: |       | 33.8830                        |       | CZK                        |       | 103,077                               |       | CZK        |       | 18,190     |       |
|                                                                                               |       |                           |       |                       |       |                                  |       |       |       |       |       |
| 2003  CZK balance, translated to USD, at December 31, 2009 at FX of:                          |       | 18.4379                        |       | USD                        |       | 5,590                                 |       | USD        |       | 987        |       |
|                                                                                               |       |                           |       |                       |       |                                  |       |       |       |       |       |
| **Net increase to Goodwill (adjustment made to Translation Adjustment  in consolidation):**        |       |                           |       | USD                        |       | 2,548                                 |       | USD        |       | 450        |       |

 

----

(1)                 Goodwill wasamortized over 15 years until the Company started to comply with FASBrequirements, as of January 1, 2002. This balance represents theremaining, unamortized goodwill, after an impairment charge taken prior to January 1,2003.

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

 

***Earnings Per Common Share***** **- The Company complies with accounting anddisclosure requirements regarding earnings per share.  Basic earnings (loss) per common share arecomputed by dividing net income (loss) by the weighted average number of commonshares outstanding during the period. Diluted earnings (loss) per common share incorporate the dilutive effectof common stock equivalents on an average basis during the period.  As of December 31, 2009, the Company’scommon stock equivalents include 838,745 unexercised stock options, 75,000outstanding warrants, 75,000 shares of restricted stock, and 45,486 sharesissuable under the Company’s Deferred Compensation Plan.  A year ago, the common stock equivalentsincluded 429,065 unexercised stock options, 75,000 shares of restricted stock,and 26,655 deferred compensation shares. These shares for the respective years were included in the computationof diluted earnings per common share, if such unexercised stock options,warrants, restricted stock, and deferred compensation stock were vested and “in-the-money.”

 

Atable illustrating the impact of dilution on earnings per share, based on thetreasury stock method, is presented below:

 

| ** **                                                                          | ** ** | **For the Year Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------|------------|
| **(amounts in thousands, except for**                                               | ** ** | **December 31,**  | ** ** |
| **share data)**                                                                     | ** ** | **2009**               | ** ** | **2008** | ** ** |
| Basic  Earnings Per Share:                                                          |       |                   |       |   |   |
| Net  income                                                                         |       | $                      | 2,099      |   | $ | 3,704 |   |
|                                                                                |       |                   |       |   |   |
| Weighted  average common shares                                                     |       | 8,870,270              |       | 8,851,480 |   |
|                                                                                |       |                   |       |   |   |
| Basic  earnings per share                                                           |       | $                      | 0.24       |   | $ | 0.42 |   |
|                                                                                |       |                   |       |   |   |
|                                                                                |       |                   |       |   |   |
| Diluted  Earnings Per Share:                                                        |       |                   |       |   |   |
| Net  income                                                                         |       | $                      | 2,099      |   | $ | 3,704 |   |
|                                                                                |       |                   |       |   |   |
| Weighted  average common shares                                                     |       | 8,870,270              |       | 8,851,480 |   |
|                                                                                |       |                   |       |   |   |
| Addition  due to the effect of dilutive securities using the treasury stock method: |       |                   |       |   |   |
| Stock  options, warrants, restricted stock and deferred compensation stock          |       | 85,636                 |       | 21,873 |   |
|                                                                                |       |                   |       |   |   |
| Dilutive  potential common shares                                                   |       | 8,955,906              |       | 8,873,353 |   |
|                                                                                |       |                   |       |   |   |
| Diluted  earnings per share                                                         |       | $                      | 0.23       |   | $ | 0.42 |   |

 

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***Revenue Recognition*****-**** **The Companycomplies with requirements for revenue recognition in financialstatements.  Casino revenue is defined asthe net win from gaming activities, which is the difference between gamingwagers and the amount paid out to patrons, and is recognized on the day it isearned.  Revenues generated fromancillary services, including sales of food, beverage, cigarettes, and casinologo merchandise are recognized at the time the related services are performedand represent, in the aggregate, less than three percent of total revenues forthe years ended December 31, 2009 and 2008.  Food and beverage revenues representapproximately two percent and less than one percent of total consolidatedrevenues for the years ended December 31, 2009 and 2008, respectively.

 

***Promotional Allowances***** ****-**** **Promotionalallowances primarily consist of the provision of gratuitous food and beveragesand, to certain of its valuable players, hotel accommodations.  For the years ended December 31, 2009and 2008, revenues do not include the retail amount of food and beverages andhotel accommodations of $3,874 and $2,681, respectively, provided at no-chargeto customers. The retail value of the food and beverages given away isdetermined by dividing the food and beverage costs charged to the gamingoperation of $1,539 and $1,155, for the respective periods, by the averagepercentage of cost of food and beverages sold. The cost of hotel accommodations is either the out-of-pocket expenses paidto other hotels to accommodate TWC’s customers or the retail charge of rooms atthe Hotel Savannah. The promotional allowances are summarized below:

 

| ** **                                  | ** ** | **For the Year Ended** | ** ** |
|---------------------------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **December 31,**  | ** ** |
| **(amounts in thousands)**                  | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                        |       |                   |       |   |   |
| Cost  of gratuitous food and beverages (A)  |       | $                      | 2,301      |   | $ | 1,504 |   |
| Average  cost of food and beverages sold(B) |       | 40.4                   | %          | 42.8 | % |
|                                        |       |                   |       |   |   |
| Retail  value of food and beverages (A/B)   |       | $                      | 5,699      |   | $ | 3,514 |   |
| Cost  of hotel accommodations               |       | 45                     |       | 2 |   |
| Total  promotional allowances               |       | $                      | 5,744      |   | $ | 3,516 |   |

 

***External Advertising*********-****** The Company complies with the accounting andreporting requirements for the reporting on advertising costs.  External advertising expenses are charged tooperations as incurred and were $834 and $1,234 for the years ended December 31,2009 and 2008, respectively.

 

***Fair Value of Financial Instruments***** ****-**** **The fair valuesof the Company’s assets and liabilities that qualify as financial instrumentsunder proper accounting and disclosure requirements about the fair value offinancial instruments approximate their carrying amounts presented in theaccompanying consolidated balance sheets at December 31, 2009 and 2008.

 

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

 

***Impairment of Long-Lived Assets***** ****-**** **The Companyadheres to proper accounting for the impairment on disposal of long-livedassets and periodically evaluates whether current facts or circumstancesindicate that the carrying value of its depreciable assets to be held and usedmay be recoverable.  If suchcircumstances are determined to exist, an estimate of undiscounted future cashflows produced by the long-lived assets, or the appropriate grouping of assets,is compared to the carrying value to determine whether an impairmentexists.  If an asset is determined to beimpaired, the loss is measured based on the difference between the asset’s fairvalue and its carrying value. An estimate of the asset’s fair value is based onquoted market prices in active markets, if available. If quoted market pricesare not available, the estimate of fair value is based on various valuationtechniques, including a discounted

 

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valueof estimated future cash flows. The Company reports an asset to be disposed ofat the lower of its carrying value or its estimated net realizable marketvalue. There were no impairment losses for long-lived assets recorded for theyears ended December 31, 2009 and 2008.

 

***Stock-based Compensation*****-** TheCompany complies with the accounting and reporting requirements for share-basedpayments which permit companies to adopt its requirements using either a “modifiedprospective” method, or a “modified retrospective” method. Under the “modifiedprospective” method, compensation cost is recognized in the financialstatements beginning with the effective date, based on the requirements ofshare-based payments for all share-based payments vested after that date, andbased on these requirements for all unvested awards granted prior to theeffective date of this accounting requirement. Under the “modifiedretrospective” method, the requirements are the same as under the “modifiedprospective” method, but also permit entities to restate financial statementsof previous periods, either for all prior periods presented or to the beginningof the fiscal year in which the statement is adopted, based on previous proforma disclosures made in accordance with this reporting requirement.Accordingly, the Company has adopted the modified prospective method ofrecognition, and began applying the valuation and other criteria to stockoptions and warrants granted beginning January 1, 2006.  The Company is recognizing expense for theunvested portion of previously issued grants based on the valuation andattribution methods used previously to calculate the pro formadisclosures.  The Company did notrecognize expense for employee stock options prior to January 1, 2006.

 

The Company currentlyutilizes the Black-Scholes option pricing model to measure the fair value ofstock options granted to certain key management employees (“KMEs”), as well asfor warrants issued for services. While this accounting requirement permitsentities 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 accounting and reporting requirementto measure the fair value of stock options and warrants granted.

 

In 2009 and 2008, theCompany expensed approximately $254 and $149, respectively for granted optionsto certain KMEs, which was recognized in its selling, general andadministrative expenses in the consolidated statements of income.  The Company also incurred expenses approximating$40 and $36 for shares and warrants issued for services in 2009 and 2008,respectively.

 

***Czech Gaming Taxes*****-**Themajority of TWC’s revenues are derived from gaming operations in the CzechRepublic, which are subject to gaming taxes only, while its non-gamingrevenues, which are not material, have correspondingly non-material corporateincome tax liabilities under Czech law. TWC’s gaming-related taxes for theyears ended December 31, 2009 and 2008 are summarized in the followingtable:

 

| ** **                  | ** ** | **For the Year Ended December 31,** | ** ** |
|-----------------------------|------------|------------------------------------------|------------|
| **(amounts  in thousands)** | ** ** | **2009**                                 | ** ** | **2008** | ** ** |
| Gaming Taxes                |       | $                                        | 1,783      |   | $ | 1,994 |   |
| Charity Taxes               |       | 2,799                                    |       | 2,914 |   |
| Total Czech Gaming Taxes    |       | $                                        | 4,582      |   | $ | 4,908 |   |

 

Gaming taxes are computedon gross gaming revenues, which are comprised of live (table) games and slotgames revenues. For live game revenue, the applicable taxes and fees are: (i) a10% administration tax; (ii) a 1% state supervision fee; and (iii) acharity “contribution” (i.e., a tax), herein referred to as the charity tax,for publicly beneficial, cultural, sporting and welfare purposes,

 

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according to a grossrevenue formula specified by the Czech Ministry of Finance, net of theaforementioned taxes and fees.

 

Charitytaxes are also computed on the reported slot revenues of each of our three slotsubsidiary companies, ACC Slot, s.r.o., Hollywood Spin s.r.o. and LMJ Slots.r.o., net of gaming taxes and fees (See also “Item1., Taxation, Gaming Taxes”).  Therefore,for all gaming revenue, net of applicable taxes and fees, up to CZK 50,000 (or$2,712 at the December 31, 2009 exchange rate), a 6% charity tax applies;up to CZK 100,000 (or $5,424 at the same exchange rate), an 8% rate applies; upto CZK 500,000 (or $27,118 at the same exchange rate), a 10% rate applies; andabove the CZK 500,000 gaming revenue threshold, a 15% rate applies.  For slot game revenue, the applicableassessment is the charity tax, net of local (municipality) administration andslot state-licensing fees.

 

Gaming taxes payable aredue to the Czech Ministry of Finance annually, typically in April of thesubsequent year, while charity taxes payable, although having no stated duedates, are paid as mutually agreed with the charities, customarily by May ofthe subsequent year.  The Company mayallocate this charity contribution to local schools, sports clubs, subsidizedor volunteered organizations, or municipalities in which each of the Company’scasinos operate. The distribution is subject to the prior approval of the CzechMinistry of Finance.

 

In conformity with theEuropean Union (“EU”) taxation legislation, when the Czech Republic joined theEU in 2004, its VAT increased from 5% to 22%, from January 2004 through December 2009,and ranged between 9% and 19% for all intra-EU generated purchases.  Beginning January 1, 2010, VAT rates willincrease to between 10% and 20%.  All non-EU generated purchases were impacted by identical VAT increases,beginning in May 2004. The Company pays its VAT directly to its vendors inconnection with any purchases that are subject to this tax.  Unlike in other industries, VATs are notrecoverable for gaming operations.  Asfor the Company’s new hotel operation, Hotel Savannah, which opened in January 14,2009, the recoverable VAT was non-material for the year ended December 31,2009.

 

***Income Taxes***** ****-**** **The Company complies with accounting and reporting requirements withrespect to accounting for income taxes, which require an asset and liability approachto financial accounting and reporting for income taxes.  Deferred income tax assets and liabilitiesare computed for differences between the financial statement and the tax basesof assets and liabilities that will result in future taxable or deductibleamounts, based on enacted tax laws and rates applicable to the periods in whichthe differences are expected to affect taxable income.  Valuation allowances are established, whennecessary, to reduce deferred income tax assets to the amount expected to berealized.  In accordance with GAAP, theCompany is required to determine whether a tax position of the Company is morelikely than not to be sustained upon examination by the applicable taxingauthority, including resolution of any related appeals or litigation processes,based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount ofbenefit that is greater than fifty percent likely of being realized upon ultimatesettlement.  De-recognition of a taxbenefit previously recognized could result in the Company recording a taxliability that would reduce net assets. This policy also provides guidance on thresholds, measurement,de-recognition, classification, interest and penalties, accounting in interimperiods, disclosure, and transition that is intended to provide betterfinancial statement comparability among different entities.  The Company is subject to income taxexaminations by major taxing authorities for all tax years since inception.Based on its analysis, the Company has determined that the adoption of thispolicy did not have a material impact on the Company’s financial statements forthe years ended December 31, 2009 and 2008. However, management’sconclusions regarding this policy may be subject to review and adjustment at alater date based on factors including, but not limited to, on-going analyses ofand changes to tax laws, regulations and interpretations thereof.

 

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***Reclassifications***-Certain 2008 amounts have been reclassified to conform to the 2009presentation.

 

***Recently Issued and AdoptedAccounting Standards******:***

 

***Fair Value Measurements*** — In September 2006, the Financial AccountingStandards Board (“FASB”) issued guidance regarding fair valuemeasurements.  This guidance defines fairvalue, establishes a framework for measuring fair value, and expandsdisclosures about fair value measurements. It applies to other accountingpronouncements where the FASB requires or permits fair value measurements butdoes not require any new fair value measurements. In February 2008, FASBissued a pronouncement, which delayed the effective date of its prior guidanceregarding fair value measurements, specifically for certain non-financialassets and non-financial liabilities to fiscal years beginning after November 15,2008, and interim periods within those fiscal years. The Company adopted theguidance for financial assets and liabilities on January 1, 2008. It didnot have any impact on the Company’s results of operations or financialposition and did not result in any additional disclosures and the Companyadopted the guidance for non-financial assets and non-financial liabilities on January 1,2009, resulting in no impact to the Company’s consolidated financial position,results of operations or cash flows.

 

In April 2009, the FASB issued new accounting guidance ondetermining fair value when the volume and level of activity for the asset orliability have significantly decreased and identifying transactions that arenot orderly.  The guidance affirms thatthe objective of fair value when the market for an asset is not active is theprice that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement dateunder current market conditions.  Itprovides guidance for estimating fair value when the volume and level of marketactivity for an asset or liability have significantly decreased and determiningwhether a transaction was orderly. It applies to all fair value measurementswhen appropriate. The adoption of this guidance did not have a significantimpact on the Company’s consolidated financial statements or related footnotes.

 

In August 2009, the FASB issued an update to provide furtherguidance on how to measure the fair value of a liability, an area whereaccounting practitioners have been seeking further guidance. The update: i)sets forth the types of valuation techniques to be used to value a liabilitywhen a quoted price in an active market for the identical liability is notavailable, ii) clarifies that when estimating the fair value of a liability, areporting entity is not required to include a separate input or adjustment toother inputs relating to the existence of a restriction that prevents thetransfer of the liability, and iii) clarifies that both a quoted price in anactive market for the identical liability at the measurement date and thequoted price for the identical liability when traded as an asset in an activemarket when no adjustments to the quoted price of the asset are required areLevel 1 fair value measurements. This standard was effective beginning fourthquarter of 2009 for the Company. The adoption of this standard did not impactthe Company’s consolidated financial statements.

 

***Business Combinations*** — In December 2007, the FASB issued newaccounting guidance on business combinations. The pronouncement establishes principles and requirements for how theacquirer in a business combination recognizes and measures in its financialstatements the fair value of identifiable assets acquired, the liabilitiesassumed and any noncontrolling interest in the acquiree at the acquisitiondate. The pronouncement determines what information to disclose to enable usersof the financial statements to evaluate the nature and financial effects of thebusiness combination. It is effective for fiscal years beginning after December 15,2008.  The Company adopted thepronouncement on January 1, 2009 resulting in no impact to the Company’sconsolidated balance sheets, statements of income and cash flows.

 

***Goodwill*** — In April 2008, the FASB issued guidance regarding thedetermination of the useful life of intangible assets, which amends the factorsthat should be considered in developing renewal or extension assumptions usedto determine the useful life of a recognized intangible asset under goodwilland other intangible assets. The pronouncement was effective for fiscal yearsbeginning after December 15, 2008. The adoption of this pronouncement hashad no significant impact on the Company’s consolidated financial position andresults of operations.

 

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***Subsequent Events*** — On May 28, 2009, the FASB issued guidanceregarding subsequent events, which the Company adopted on a prospective basisbeginning April 1, 2009. The guidance is intended to establish generalstandards of accounting and disclosure of events that occur after the balancesheet date but before financial statements are issued or are available to beissued. It requires the disclosure of the date through which an entity hasevaluated subsequent events and the basis for selecting that date. Theapplication of the pronouncement did not have an impact on the Company’sconsolidated financial position, results of operations or cash flows.

 

***FASB Accounting Standards Codification (“ASC”)*** — On June 29, 2009, the FASB issued anaccounting pronouncement establishing the FASB Accounting StandardsCodification as the source of authoritative accounting principles recognized bythe FASB to be applied by nongovernmental entities.  This pronouncement was effective forfinancial statements issued for interim and annual periods ending after September 15,2009, for most entities.  On theeffective date, all non-SEC accounting and reporting standards will besuperceded.  The Company adopted this newaccounting pronouncement for the quarterly period ended September 30, 2009and forward, as required, and adoption did not have a material impact on theconsolidated financial statements taken as a whole.

 

***New Accounting Pronouncements******:***

 

In December 2009, the FASB issued AccountingStandards Update (“ASU”) No. 2009-17, Consolidations (Topic 810) —Improvements to Financial Reporting by Enterprises Involved with VariableInterest Entities (“ASU No. 2009-17”). ASU No. 2009-17 requires aqualitative approach for determining the primary beneficiary of a variableinterest entity and replaces the quantitative evaluation previously set forthunder FASB Interpretation No. 46 (revised December 2003), “Consolidationof Variable Interest Entities.” This approach is focused on identifying thereporting entity that has the ability to direct the activities of a variableinterest entity that most significantly affects the entity’s economicperformance and has the obligation to absorb the entity’s losses or has theright to receive benefits from the entity. ASU No. 2009-17, among otherthings, will require enhanced disclosures about a reporting entity’sinvolvement in variable interest entities. The guidance under ASU No. 2009-17will become effective for the first annual period beginning after November 15,2009, and interim periods within that first annual period.  The Company is assessing what impact, if any,adoption of this standard will have on its consolidated financial statements.

 

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

 

At December 31, 2009 and 2008, property andequipment consisted of the following:

 
| ** **                                     | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|------------------------------------------------|------------|------------|------------|------------|------------|
| Land                                           |       | $          | 3,569      |       | $          | 3,283 |   |
| Building and improvements                      |       | 32,307     |       | 31,486     |       |
| Furniture, fixtures and other equipment        |       | 11,643     |       | 8,650      |       |
|                                           |       |       |       | ** ** |       |
|                                           |       | 47,519     |       | 43,419     |       |
| Less accumulated depreciation and amortization |       | (9,316     | )          | (7,580     | )          |
|                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                           |       | $          | 38,203     |       | $          | 35,839 |   |

 

In 2009, the Company capitalized allconstruction-related costs associated with its Hotel Savannah and the Spa.  Depreciation and amortization expense for theyears ended December 31, 2009 and 2008 were approximately $2,140 and$1,428, respectively.  In 2008, theCompany received $187 in proceeds for the sale of 22 non-performing slotmachines, and incurred an accounting loss of $113 for those same assets.

 

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

 

AtDecember 31, 2009 and 2008, long-term debt consisted of the following:

 
| ** **                            | ** ** | **2009** | ** ** | **2008**   | ** ** |
|---------------------------------------|------------|----------|------------|------------|------------|
| Replacement Notes (a)                 |       | $        | 1,550      |       | $          | 1,550 |   |
| Commerzbank amortized loan (b)        |       | 6,784    |       |       |       |
| Commerzbank revolving credit line (b) |       | 2,170    |       | 8,128      |       |
|                                  |       | 10,504   |       | 9,678      |       |
| Less current portions:                |       |     | ** ** | ** ** | ** ** |
| Replacement Notes                     |       | 1,550    |       |       |       |
| Commerzbank amortized loan            |       | 1,696    |       |       |       |
| Commerzbank  revolving credit line    |       | 275      |       | 175        |       |
|                                  |       |     |       |       |       |
|                                  |       | $        | 6,983      |       | $          | 9,503 |   |

 

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

 

(b)             In November 2009, theCompany restructured its long-term debt (former revolving credit line) with anew credit facility from Commerzbank Aktiengesellschaft, pobocka Praha(“Commerzbank”).  The new credit facilityallowed the Company to retire its prior revolving credit facility and replaceit with a combination of a long-term loan and a new smaller revolving creditline.  The credit facility is provided intwo tranches: an amortized, 4-year term loan of CZK 125,000 (or approximately$6,783 at the December 31, 2009 exchange rate), with interest based on thethree-month Prague Interbank Offered Rate (“PRIBOR”) plus 500 basis points, anda two-year revolving credit line of CZK 40,000 (or approximately $2,169 at thesame exchange rate), with interest based on, depending on each draw request,the one, two, three or six-month PRIBOR plus 400 basis points, with theCompany’s option to renew the term for one-year.  The revolving credit line will be reduced toCZK 35,000 (or approximately $1,898 at the same exchange rate) after 12 monthsfrom the signing date.  The new creditfacility includes financial covenants, security and requirements, which notablyare: (i) a mandatory annual prepayment that requires that 25% of theborrower’s excess cash above a certain annually-escalating bank balance at theend of each fiscal year be applied toward the term loan’s principal balance; (ii) thepledge of the Route 59 and Route 55 casinos and their underlying land, andother guarantees as security; and (iii) the term loan to be repaidquarterly in equal principal installments, with the applicable three-monthPRIBOR rate plus the said basis points. The loan matures on November 4, 2013.  As of December 31, 2009, the Company hadfully drawn down the revolving credit facility’s limit of CZK 40,000, orapproximately $2,169.  For the yearsended December 31, 2009 and 2008, the weighted average of the interestrates on the drawn amounts is approximately 6.41% and 8.15%, respectively.  The Company is in full compliance with thecredit facility’s financial covenants up to and including the year ended December 31,2009.

 

Principalpayments due on long-term debt are as follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| 2010                                        |       | $          | —     |   |
| 2011                                        |       | 3,590      |       |
| 2012                                        |       | 1,696      |       |
| 2013                                        |       | 1,697      |       |
|                                        |       |       |       |
|                                        |       | $          | 6,983      |   |

 

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

 

AtDecember 31, 2009 and 2008, accrued expenses and other current liabilitiesconsisted of the following:

 
| ** **                        | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Accrued payroll and related costs |       | $        | 959        |     | $          | 975 |   |
| Operational  accruals             |       | 505      |       | 486      |       |
| Bonus  payable                    |       | 195      |       |     |       |
|                              |       |     |       |     |       |
|                              |       | $        | 1,659      |     | $          | 1,461 |   |

 

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

 

***Lease Obligations*********-** The Company is obligated under severaloperating leases expiring through 2015.  Futureaggregate minimum annual rental payments under all of these leases for thelesser of six years or until their expiration dates are as follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|
| 2010                              |       | $          | 120        |   |
| 2011                              |       | 117        |       |
| 2012                              |       | 118        |       |
| 2013                              |       | 118        |       |
| 2014                              |       | 120        |       |
| 2015                              |       | 121        |       |
|                                   |            |            |            |  |

 

Rentexpense under these operating leases was approximately $120 and $100 for theyears ended December 31, 2009 and 2008, respectively.

 

TheCompany is also obligated under certain five-year, slot equipment operatingleases, expiring in 2011 and 2012, which include a monthly fixed rental fee perslot machine, and an option for replacement to different/newer machines duringthe term of the lease.  In 2009, theCompany’s slot lease expenses were approximately $2,078 versus $1,777 in 2008,partially as a result of an addition of eight new leased slot machines in 2009versus the prior year.

 

***Employment Agreements*******-** The Company’s July 1,2005 employment agreement with its Chief Executive Officer (“CEO”), Mr. RamiS. Ramadan, absent the intervention of either party by September 30th ofeach year, renewed automatically for another calendar year ending December 31,2010.  In addition to a perpetuallyrenewable employment term of one year absent the intervention of either party,the agreement provides for annual compensation, plus participation in theCompany’s benefits programs and equity incentive plans.  Effective April 1, 2008, Mr. Ramadan’sannual salary was increased to $450 from $400, as recommended by the Company’sCompensation Committee and approved by its Board of Directors.  As of December 31, 2009, $450 of annualcompensation remains payable in 2010, pursuant to the evergreen renewal termsof said employment agreement, excluding any bonus awards that may be or havebeen granted in 2010 at the discretion of the Board of Directors.  On March 5, 2009, the Board ofDirectors, pursuant to the recommendation of its Compensation Committee,awarded Mr. Ramadan an individual performance award of $361.9, of which$275 was discretionary and $86.9 was earned from achievement of performancetargets set for the 2008 Profit Sharing Plan. On February 5,2010, the Company’s Compensation Committee recommended and the Board ofDirectors approved a discretionary, individual performance award of $135 to Mr. Ramadan.  Mr. Ramadan did not earn any performanceaward from the 2009 Profit Sharing Plan.

 

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Pursuantto the renewal of the employment agreement with Mr. Ramadan in July 2005,Mr. Ramadan was also granted seven-year options to purchase 175,000 sharesof Common Stock, of which options to purchase 35,000 vested immediately, andthe balance to be vested in equal parts, over a four-year vesting period, onthe anniversary of the date of grant.  Asof December 31, 2009, these options have all been vested.  The exercise price of these optionsincrementally increases every six months, starting at $2.80 on July 1,2005 to a maximum of $4.11 on January 1, 2012.  The weighted average exercise price of thevested options was $3.98 at December 31, 2009.  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 share allotments.  None of therestricted shares have been vested to date.

 

OnFebruary 4, 2007, Mr. Ramadan was granted seven year options topurchase 50,000 shares of Common Stock, of which options to purchase 12,500shares vested immediately, and the balance will vest in three equal parts, overa three-year vesting period, on the anniversary of the date of grant.  As of December 31, 2009, only 12,500options remain unvested.  The exerciseprice of these options, vested and unvested, was set at $3.75 per share, theclosing price on the date of grant.

 

Further,on October 23, 2007, pursuant to the Company’s 2004 Equity Incentive Plan,Mr. Ramadan was granted seven year options to purchase 125,000 shares ofCommon Stock, with options to purchase 25,000 shares that vested immediately,and the balance to be vested in four equal parts, over a four-year vestingperiod, on the anniversary of the date of grant.  As of December 31, 2009, only 50,000options remain unvested.  The exerciseprice of all these options, vested and unvested, is set at $4.85 per share, theclosing stock price on October 23, 2007, and escalated to $5.05 on itsfirst anniversary.  On May 26, 2009,the Company’s Board of Directors froze the exercise price at $5.05 for theentire grant.

 

Novested options have been exercised by Mr. Ramadan as of December 31,2009.

 

***401 (k) and Profit Sharing Plan*****-**The Company maintains a contributory 401(k) plan and a profit sharingplan.  These plans are for the benefit ofall eligible corporate employees, who may have up to 17% 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$43 in 2009 and $40 in 2008.

 

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

 

***Commitments and Contingencies*** **-******The Company may be, from time to time, a party tovarious legal proceedings and administrative actions, all arising from theordinary course of business. Although it is impossible to predict the outcomeof any legal proceeding, the Company believes any liability that may finally bedetermined with respect to such legal proceedings should not have a materialeffect on the Company’s consolidated financial position, results of operationsor cash flows.  The Company is notcurrently involved in any material legal proceeding nor were we involved in anymaterial litigation during the year ended December 31, 2009.

 

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

 

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

 

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

 

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

 

***Cash*********-** Cash consists of cash inbanks and on hand.  From time to time,the Company will maintain cash balances in a financial institution that mayexceed the Federal Depository Insurance Corporation (“FDIC”) coverage of$250.  The $250 insurance limit has beenextended through December 31, 2013, after which it will reset to $100 forall deposit accounts (excluding retirement accounts).  The Company has not experienced any losses insuch accounts and believes it is not subject to any significant credit risk oncash.  In addition, the FDIC does notinsure the Company’s foreign cash, which totaled approximately $2,458 and$3,288 at December 31, 2009 and 2008, respectively.  The Company has not incurred any losses insuch accounts and believes it is not exposed to any significant credit risk oncash.

 

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**NOTE 8 - Stockholders’ Equity**

 

In January 2008, theCompany issued 5,754 shares of our Common Stock, pursuant to warrants exercisedwith a strike price of $1.00, to U.S. Bancorp. The transaction was reflected as an addition to paid-in capital.

 

Further, in July 2008and February 2009, TWC issued an aggregate total of 25,000 shares of itsCommon Stock, as compensation pursuant to a consulting agreement, to AllianceAdvisors, LLC, an investor relations firm. The cost of issuances was reflectedas an approximate $36 and $40 reductions to additional paid-in capital for therespective months.

 

Additionally, $8 ofresidual costs of the $3,500 Capital Raise was also reflected as a reduction ofadditional paid-in capital in 2008.

 

For the years ended December 31,2009 and 2008, the Company recognized stock-based compensation expenses of $254and $149, respectively, for the vesting of granted stock options andwarrants.  On November 30, 2009, TWCgranted warrants to purchase 75,000 shares of its Common Stock at the thenmarket price of $3.00 per share, in connection with the Company’s engagement ofa capital markets advisor, Hurricana Capital LLC.  The warrants vest over a two-year period,with the first of three equal parts vested immediately upon the grant date, andthe remaining portions upon thesucceeding two anniversary dates of the grant. The $16 expense was recognized in the Company’s selling, general and administrative expenses in the consolidatedstatements of incomefor the vested portion and a credit to additional paid-in-capital.

 

For the year ended December 31,2008, the Company also recognized 16 additional outstanding shares of itsCommon Stock for the retirement of fractional shares, in connection with TWC’s1-for-100 reverse stock split completed in April 2004.

 

The Company’s Articles ofIncorporation authorize the issuance of four (4) million shares of “blankcheck” preferred stock, with designations, rights and preferences to bedetermined from time to time by its Board of Directors. Accordingly, the Boardof Directors is empowered, without further stockholder approval, to issuepreferred stock with dividend, liquidation, conversion, voting or other rights.The Board of Directors has no current plans to issue any shares of preferredstock.

 

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

 

***Notes Receivables*****—**In connectionwith the TWC’s management of the Grand Casino Lav, on January 10, 2007,the Company extended three EUR currency loans to Grand Hotel Lav, d.o.o., theowner of the Grand Casino Lav and Nightclub, as follow: (i) a three-year,4.0% interest per annum loan of €568, or approximately $814 using theprevailing exchange rate as of December 31, 2009, for the purchase ofgaming equipment; (ii) a two-year, non-interest bearing loan of €229, orapproximately $328, for pre-opening costs related to the casino and nightclub;and (iii) a one-year (renewable), non-interest bearing loan of €170, orapproximately $244, for working capital. Because of the nature of the intended use of each of the loans, topromote goodwill with the owner and to secure the management contract, TWCagreed to waive interest on two of the three loans granted.  The original loan agreements stipulatedmonthly repayment of principal and interest, when applicable, at the end ofeach month of the respective terms, which commenced on May 31, 2007.  Additionally, default interest of 9.0% perannum applied to any monthly payment not made on time, regardless of anydeferment allowance.  Recorded interestand penalty interest were approximately $31 and $121, respectively, as of December 31,2009.

 

TWCconsidered the FASB requirements of interest on receivables and payables, whenthe original notes were issued and concluded that the excess (waived) interestto be recorded over the intended timeline for the loans would beimmaterial.  In light of the slower thanexpected growth of the operation 

 

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andthe cash flow management challenges experienced during the low seasons by theGrand Hotel Lav, d.o.o., TWC accepted a payment deferment plan in September 2008,which provided for the total of the monthly loan payments and annually earnedmanagement fees for the year ended December 31, 2008 to be paid in threemonthly accelerated installments beginning June 2009 (during the casinooperation’s high season in the summer months). As the high season for the operation in 2009 did not materialize due tothe worldwide economic crisis, in December 2009, the Company agreed to aproposal from the owners of Grand Casino Lav to consolidate the threeoutstanding loans and accrued interest and penalties into a single, 3-year,3.55% per annum interest, term loan (the “Replacement Loan”), to be effective January 1,2010, excluding accrued management fees. The Replacement Loan principal amount is approximately 875 EUR, oraround $1,254.  Monthly payments for theReplacement Loan will commence May 31, 2010 (with a four-month,interest-free grace period).  In additionto liens on gaming equipment, the Replacement Loan is secured by ninelegally-binding receivable notes, which can be presented at any time to theowner’ bank for the satisfaction of these receivable notes.  In the event of a sale of the business, theReplacement Loan would be transferred to the new owner.  TWC management believes the loan is fullycollectible.

 

***Restricted Deposits*** -  Restricted depositsaggregated CZK 26,000, relating to Czech license bond requirements, for year2009 and 2008, respectively.  Usingrespective year-end exchange rates, these deposits have been translated to$1,410 and $1,379 at December 31, 2009 and 2008, respectively.

 

***Other Long-term Liabilities*** - At December 31, 2008,other long-term liabilities consisted of accrued interest on the ReplacementNotes, payable in June 2010.  Therewere no other long-term liabilities at December 31, 2009.

 

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

 

Inthe Czech Republic, gaming income is not subject to corporate income tax.  In lieu of income taxes, gaming income issubject to other taxes in the Czech Republic, including gaming and charitytaxes, which are primarily based on percentages of gaming revenues.  Foreign net operating loss carry-forwards(disclosed below) were derived from non-gaming activities and can only beapplied against non-gaming activities. However, for the years ended December 31, 2009 and 2008, theCompany did incur approximately $14 and $31 of foreign income taxes,respectively for non-gaming revenues earned.

 

AtDecember 31, 2009, the Company had U.S. and foreign net operating losscarry forwards (“NOL’s”) of approximately $36,130 and $4,375, respectively,available to offset certain future income taxes payable.  However, based on limited analysis, a sizablewarrant exercise in February 2001 or earlier events may have triggeredsignificant limitations of preexisting U.S. NOL’s, pursuant to Internal RevenueCode Section 382, to the extent that substantially all of the Company’sexisting U.S. NOL’s prior to February 2001, aggregating approximately$15,565, may be significantly limited. The U.S. NOL’s generated subsequent to February 2001, aggregatingapproximately $20,565, resulted in an estimated $9,254 deferred tax asset at December 31,2009 and the foreign NOL resulted in an estimated $1,050 deferred tax asset at December 31,2009.  A full valuation allowance hasbeen established for these deferred tax assets since its realization isconsidered unlikely.  U.S. NOL’s cannotbe used to offset Czech net income nor can Czech NOL’s be used to offset U.S.net income.

 

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TheU.S. NOL’s expire between 2014 and 2018. The foreign NOL’s expire between 2009 and 2012.  During the year ended December 31, 2009,there was an immaterial amount of foreign NOL’s which expired.  The following table presents the U.S. andforeign components of pretax income before income taxes for the years ended December 31,2009 and 2008:

 
| ** ** | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------|------------|----------|------------|----------|------------|
|       |       |     |       |     |       |
| U.S.       |       | $        | (3,083     | )        | $          | (2,211 | ) |
| Foreign    |       | 5,196    |       | 5,946    |       |
|       |       |     |       |     |       |
|       |       | $        | 2,113      |     | $          | 3,735 |   |

 

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

 

**NOTE 11 -****Stock Options and Warrants**

 

***Stock Options Plans***

 

Theactivity in the Company’s stock option plans was as follows fpr the dates indicated:

 
| ** **                                  | ** ** | **Number of********Options** | ** ** | **Range of********Exercise Price** | ** ** | **Weighted  Average********Exercise Price** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|------------------------------------|------------|---------------------------------------------|------------|
|                                        |       |                         |       |                               |       |                                        |       |
| Balance outstanding,January 1, 2008    |       | 419,135                      |       | $                                  | 2.00-83.00 |                                        | $          | 2.41 |   |
|                                        |       |                         |       |                               |       |                                        |       |
| Granted in 2008                             |       | 10,000                       |       | 4.10                               |       | 4.10                                        |       |
| Expired in 2008                             |       | (70                          | )          | 24.00-46.00                        |       | 32.29                                       |       |
|                                        |       |                         |       |                               |       |                                        |       |
| Balance outstanding, December 31, 2008 |       | 429,065                      |       | 2.00-83.00                         |       | $                                           | 3.75       |   |
|                                        |       |                         |       |                               |       |                                        |       |
| Granted in 2009                             |       | 410,000                      |       | 3.50                               |       | 3.50                                        |       |
| Expired in 2009                             |       | (320                         | )          | 32.00-83.00                        |       | 50.88                                       |       |
|                                        |       |                         |       |                               |       |                                        |       |
| Balance outstanding, December 31, 2009 |       | 838,745                      |       | $                                  | 2.00-37.50 |                                        | $          | 3.72 |   |
|                                        |       |                         |       |                               |       |                                        |       |
| Exercisable,December 31, 2009          |       | 463,745                      |       | $                                  | 2.00-37.50 |                                        | $          | 3.72 |   |

 

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OnJanuary 4, 2008, pursuant to the Company’s 2004 Equity Incentive Plan andas part of his compensation package, we granted our Managing Director ofOperations, who is a resident of the Czech Republic and is not a namedexecutive officer of the Company, options to purchase 10,000 shares of theCompany’s Common Stock.  The seven-yearoptions vest in four equal parts, with the first part on the date of grant andeach subsequent part on the next succeeding anniversary of the grant date.  The exercise price for these options, vestedand unvested, is $4.10 per share, the market closing price at the date ofgrant.

 

OnMay 26, 2009, we also granted options to purchase 410,000 shares of theCompany’s Common Stock to ten KMEs.  Theseven-year options vest in four equal parts, with the first part on the date ofgrant and each subsequent part on the anniversary of the grant date.  The exercise price for these options, vestedand unvested, is $3.50 per share, the market closing price at the date ofgrant.

 

Ineach instance, the option exercise price per share was equal to or above themarket value of the underlying stock on the date of grant.  Options generally expire between five and tenyears after the date of grant or earlier upon termination of employment, asdefined in the plans.

 

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

 
| ** **               | ** ** | **Option Pricing Assumptions** | ** ** |
|--------------------------|------------|--------------------------------|------------|
| **Grant Year**           | ** ** | **2009**                       | ** ** | **2008** | ** ** |
|                     |       |                           |       |   |   |
| Stock Price Volatility   |       | 39.7                           | %          | 46.8 | % |
| Risk-Free Interest Rate  |       | 2.8                            | %          | 3.3 | % |
| Expected Life (in years) |       | 7.0                            |       | 6.9 |   |

 

Additionalinformation about the Company’s outstanding stock options at December 31,2009 is as follows:

 
| ** **           | ** ** | **Options Outstanding** | ** ** |
|----------------------|------------|-------------------------|------------|
| ** **           | ** ** | ** **              | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **           | ** ** | ** **              | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **           | ** ** | ** **              | ** ** | **Remaining** | ** ** | **Weighted** | ** ** |
| ** **           | ** ** | ** **              | ** ** | **Contractual** | ** ** | **Average** | ** ** |
| **Range  of**        | ** ** | **Number of**           | ** ** | **Life** | ** ** | **Exercise** | ** ** |
| **Exercise  Prices** | ** ** | **Shares**              | ** ** | **(in Years)** | ** ** | **Price** | ** ** |
|                 |       |                    |       |   |   |   |   |
| $0.01  to $2.50      |       | 60,150                  |       | 4.59 |   | $ | 2.50 |   |
| $2.51  to $3.50      |       | 413,425                 |       | 7.39 |   | $ | 3.50 |   |
| $3.51  to $4.50      |       | 235,525                 |       | 3.95 |   | $ | 3.62 |   |
| $4.51  to $5.00      |       | 1,575                   |       | 3.51 |   | $ | 5.00 |   |
| $5.01  to $10.00     |       | 126,925                 |       | 5.79 |   | $ | 5.07 |   |
| $10.01  to $25.00    |       | 925                     |       | 2.96 |   | $ | 16.62 |   |
| $25.01  to $50.00    |       | 220                     |       | 1.29 |   | $ | 34.68 |   |
|                 |       |                    |       |   |   |   |   |
|                 |       | 838,745                 |       | 5.97 |   | $ | 3.72 |   |

 

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***Warrants***

 

Theactivity in the Company’s warrants is as follows:

 
| **Exercise  Price** | ** ** | ** **   | ** ** | **Balance,**        | ** ** | ** **    | ** ** | ** **  | ** ** | **Balance,**          | ** ** | ** **   | ** ** | **Balance,**          | ** ** |
|---------------------|------------|--------------|------------|---------------------|------------|---------------|------------|-------------|------------|-----------------------|------------|--------------|------------|-----------------------|------------|
| **per**             | ** ** | **Warrants** | ** ** | **January 1,** | ** ** | **Exercised** | ** ** | **Expired** | ** ** | **December 31,** | ** ** | **Granted**  | ** ** | **December 31,** | ** ** |
| **Warrants**        | ** ** | **Expiring** | ** ** | **2008**            | ** ** | **2008 (1)**  | ** ** | **2008**    | ** ** | **2008**              | ** ** | **2009 (2)** | ** ** | **2009**              | ** ** |
| $                   | 1.00       |         | 3/31/2008  |                | 10,132     |          | (5,754     | )           | (4,378     | )                     | —     |         | —     |                  | —     |   |
| 3.00                |       | 11/30/2014   |       |                |       |          |       |        |       |                  |       | 25,000       |       | 25,000                |       |
|                |       |         |       |                |       |          |       |        |       |                  |       |         |       |                  |       |
|                |       |         |       | 10,132              |       | (5,754        | )          | (4,378      | )          | —                |       | 25,000       |       | 25,000                |       |
|                     |            |              |            |                     |            |               |            |             |            |                       |            |              |            |                       |            |  |

 

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(1)     On January 25, 2008, TWCissued 5,754 shares of Common Stock, pursuant to an exercise of warrants byU.S. Bancorp.

(2)     On November 30, 2009,TWC granted 75,000 warrants to purchase TWC Common Stock at the then marketprice of $3.00 per share, in connection with the Company’s engagement with acapital markets advisor, Hurricana Capital LLC. The warrants vest over two-yearperiod, with the first of three equal parts vested immediately upon the grantdate, and the remaining parts upon the next succeeding anniversary date of thegrant (See also “Note 8 — Stockholders’ Equity” above).

 

**NOTE 12 -****Compensation Plans**

 

***2004 Equity Incentive Plan***

 

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

 

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

 

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

 

Further,the shareholders of the Company at its Annual Meetings, held in April 2006,May 2007 and May 2009, approved amendments to the 2004 Equity Plan toincrease the authorized shares that may be issued under its provisions to atotal of 927,270 shares, of which 17,270 remained available for issuance as of December 31,2009.  Additionally, the amendmentsprovide that option awards will be available for grants to the executiveofficers and non-employee directors as well as other key employees, except thatnon-employee directors are eligible to receive only awards of non-qualifiedstock options.

 

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

 

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

 

***Deferred Compensation Plan***

 

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

 

The Company adopted theDeferred Plan with the intention that it shall at all times be characterized asa “top hat” plan of deferred compensation maintained for a select group ofmanagement, as described under ERISA Sections 201(2), 301(a)(3) and401(a)(1).  The Deferred Plan shall atall times satisfy Section 409A of the Code.  Pursuant to a participant’s election, theunfunded Deferred Plan obligations are payable in the form of Common Stock andcash upon the earlier of:   (i) adesignated, in-service distribution date which must be a minimum of three (3) yearsfrom the year of the first deferral; (ii) separation from service; (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).

 

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

 

***2009 Profit Sharing Plan***

 

The 2009 Profit SharingPlan, which supersedes the 2008 Profit Sharing Plan, was approved by theCompensation Committee of the Board on May 26, 2009.

 

The 2009 Profit SharingPlan permits designated KMEs to share in the profits of the Company.  The profit sharing pool was calculated basedon a graduated scale of the attainment of consolidated year-end net incomebefore taxes versus the annual budget and the maximum sum to be distributedfrom that pool will be determined annually as a percentage of the aggregate ofthe annual salaries of the KMEs.  EachKME is required, pursuant to the 2009 Profit Sharing Plan, to defer 40% of hisor her annual profit sharing award, if attained, into the Deferred Plan.

 

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** **

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

 

None.

 

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

 

Included in this Annual Report on Form 10-K are certifications ofour CEO/CFO, which are required in accordance with Rule 13a-14 of theExchange Act. This section includes information concerning the controls andcontrols evaluation referred to in the certifications.

 

**Evaluation of DisclosureControls and Procedures.**

 

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

 

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

 

As part of our normal operations, we update our internal controls asnecessary to accommodate any modifications to our business processes oraccounting procedures.  During the fourthquarter of 2009, 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’s Report onInternal Control over Financial Reporting.**

 

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

 

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

 

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

 

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

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Projections of anyevaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate. Allinternal control systems, no matter how well designed, have inherentlimitations. Therefore, even those systems determined to be effective canprovide only reasonable assurance with respect to 

 

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financialstatement preparation and presentation. The scope of management’s assessment ofthe effectiveness of internal control over financial reporting includes all ofour Company’s consolidated subsidiaries.

 

Our management assessed the effectiveness of our internal control overfinancial reporting as of December 31, 2009. In making this assessment,our management considered the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission in “Internal Control-IntegratedFramework.”  Based on this assessment,management believes that, as of December 31, 2009, our internal controlover financial reporting was effective.

 

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

 

**Item 9B. Other Information.**

 

None.

 

**PART III**

 

**Item 10. Directors, Executive Officers andCorporate Governance.**

** **

The following table provides information as of February 28, 2010with respect to each of our directors and Mr. Rami S. Ramadan, our CEO orprincipal Executive Officer (the “named executive officer”):

 
| **Name**                          | ** ** | **Age**    | ** ** | **Position in the Company**      | ** ** | **Director Since** |
|-----------------------------------|------------|------------|------------|----------------------------------|------------|--------------------|
| ** **                        | ** ** | ** ** | ** ** | ** **                       | ** ** | ** **         |
| Rami S. Ramadan                   |       | 60         |       | CEO, CFO, President and Director |       | 1999               |
| Julio E. Heurtematte, Jr.(1) |       | 74         |       | Director                         |       | 1998               |
| Malcolm M.B. Sterrett (1)         |       | 67         |       | Director, Chairman               |       | 1998               |
| Geoffrey B. Baker (1),(2)         |       | 60         |       | Director                         |       | 1999               |
| Timothy G. Ewing (1)              |       | 49         |       | Director                         |       | 2004               |

 

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| (1) | Member of each of the Audit, Nominating and  Compensation Committees. On October 16, 2009, Mr. Ewing resigned  from the Audit Committee.                                                           |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Mr. Baker, who was appointed to a fill a  vacancy on the Board of Directors on December 22, 1998, resigned from  his position on May 13, 1999 and rejoined the Board on August 4,  1999. |

 

***Rami S. Ramadan***has served asCEO and CFO since July 12, 1999 and President since August 2000. Hismost recent prior position was Executive Vice President of Finance for the IanSchrager Hotels from November 1997 to July 1999. Prior to that, Mr. Ramadanheld senior financial positions with Hyatt Hotels from January 1994 to November 1997,Euro Disney from October 1990 to December 1993 and Le Meridien Hotelsfrom September 1975 to September 1990.

 

***Julio E. Heurtematte, Jr.***Mr. Heurtematte is a privateinvestor.  Since 1989 he has also been aconsultant, specializing in international 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. Sterrettis a private investor. From 1989 to 1993, he was a partner at the law firm ofPepper Hamilton & Scheetz, in Washington, D.C. From 1988 to 1989, heserved as General Counsel to the U.S. Department of Health and Human Servicesand from 1982 to 1988 he was a Commissioner on the U.S.

 

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Interstate Commerce Commission. Before that, he was Vice President andGeneral Counsel to the United States Railway Association and served as StaffDirector and 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. Baker is a privateinvestor and since 1983 has been a partner in a private investment firm and amember of various corporate and civic boards. A graduate of Stanford Universityand Georgetown University Law Center, Mr. Baker previously served asLegislative Director to U.S. Senator Lowell P. Weicker, Jr., and asProfessional Staff Member on the U.S. Senate Committee on Commerce, Science andTransportation.

 

***Timothy G. Ewing*****.**   Mr. Ewing,a Chartered Financial Analyst, is the managing partner of Ewing & Partnersand the manager of Value Partners, Ltd., a private investment partnershipformed in 1989, and of the Endurance Partnerships, private investmentpartnerships formed in 2001.  Mr. Ewing has been a member of the boardof directors of Cherokee, Inc. (NASDAQ: CHKE) in Van Nuys, California since1997, and Towne Bancorp, Inc, (OTCBB: TWNE) in Phoenix, Arizona, since2008. In addition, he is the immediate past chairman of the board, is currentlyan executive committee member, and serves on the governing board of the PerotMuseum of Nature & Science in Dallas Texas.  He serves on the trustees of The Dallas Operaand The Dallas Opera Foundation, the board of trustees of the Baylor HealthcareSystem Foundation, and the advisory board of the University of Texas at Dallas’Holocaust Studies Program.

 

**Information about our Board andits Committees:**

 

Our Board of Directors, which is chaired by Mr. Sterrettin a non-executive role, manages the business and affairs of the Company.  The Board holds biweekly telephone conferencecalls and meets in person on an as-needed basis.  The Board has established several committees,described below, which also meet on an as-required basis during the year.  The Board met in person two times andconducted business by written consent six times during the Company’s fiscalyear ended December 31, 2009.  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 31,2009.  While the Company has no policyrelating to director attendance at the Company’s annual meeting ofshareholders, directors are encouraged to attend.  All of the Company’s directors attended the2009 annual meeting of shareholders. None of our directors have been involved in any legal proceedings thatare material to an evaluation of the ability or integrity of any director.

 

Furthermore, our Board of Directors hasdetermined that to be considered independent, an outside director may not havea direct or indirect material relationship with the Company.  A material relationship is one which impairsor inhibits, or has the potential to impair or inhibit, a director’s exerciseof critical and disinterested judgment on behalf of the Company and itsstockholders.  In determining whether a materialrelationship exists, our Board considers a number of factors, which mayinclude, for example, the purchase or sales of goods and/or services betweenthe Company and an entity with which a director is affiliated (as an executiveofficer, partner or substantial stockholder). The Audit Committee reviews the Board’s approach to determining directorindependence periodically and recommends changes as appropriate forconsideration and approval by the full Board. There are no family relationships between any director and the otherdirectors or between any director and the executive officers of theCompany.  Notwithstanding the number ofshares beneficially owned by Mr. Ewing, our Board found him to beindependent under the applicable rules and guidelines.

 

Consistent with these considerations, ourBoard has reviewed all relationships between the Company and the members of theBoard.  Except for Mr. Ramadan, whoserves as the Company’s president, CEO and CFO, and as a member of the Company’sBoard of Directors, the remaining four members of the Company’s Board ofDirectors consist of independent directors who meet the requirements of rules forindependence promulgated by the SEC and by The NASDAQ Stock Market.

 

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The Board of Directors has established thefollowing committees:

 

***Audit Committee***

 

Our Audit Committee reviews and approvesinternal accounting controls, internal audit operations and activities, theCompany’s annual report and audited financial statements, the selection of theCompany’s independent auditors, the activities and recommendations of theCompany’s independent auditors, material changes in the Company’s accountingprocedures, the Company’s policies regarding conflicts of interest and suchother matters as may be delegated by the Board. The Audit Committee is composedof Mr. Baker, the Committee’s Chairman, Messrs. Heurtematte, andSterrett, all non-employee,“independent” directors, with Mr. Heurtematte serving as the “auditcommittee financial expert.”  Mr. Ewingresigned from the Audit Committee on October 16, 2009.  The committee met two times in person andconferred by telephone conference calls once in 2009.

 

***Compensation Committee***

 

Our Compensation Committee sets thecompensation for executive officers of the Company and sets the terms of grantsof awards under the 2004 Equity Plan and any other equity-based compensationplans adopted by the Company. The Compensation Committee, composed of Mr. Heurtematte,the Committee’s Chairman, Messrs. Baker, Sterrett and Ewing, met two timesin person, conferred by phone once 2009.

 

***Nominating Committee***

 

Our Nominating Committee has theresponsibilities set forth in its Charter, including recommending Boardnominees, determining the qualifications for such nominees and assisting theBoard of Directors in interpreting and applying the Company’s CorporateGovernance Guidelines.  The NominatingCommittee is composed of Mr. Ewing, its Chairman, Messrs. Baker,Heurtematte and Sterrett, and met once during 2009.  There have been no material changes to theprocedures by which security holders may recommend nominees to the Company’sboard of directors during 2009.

 

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

 

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

 

Prior to June 2003, Value Partners helda controlling 57.5% of our issued and outstanding Common Stock.  Further, as part of its participation in the2003 recapitalization, Value Partners received an additional 3,270,104shares.  After the issuance of 2,809,188and 1,000,000 shares of Common Stock as part of two separate private placementsthat occurred in December 2005 and August 2007, respectively, ValuePartners’ beneficial ownership was reduced from 70.9% to 37.6% of our issuedand outstanding Common Stock.  Mr. Ewing,one of our directors, can be considered to be a controlling person of ValuePartners.

 

As part of their participation in the Company’stwo private placements, Special Situations Private Equity Fund LLP and SpecialSituations Cayman Fund, LP, and Wynnefield Small Cap Value Offshore Fund, Ltd,Wynnefield Partners Small Cap Value LP and Wynnefield Partners Small Cap ValueLP1, currently hold 23.5% and 16.7%, respectively, of our issued andoutstanding Common Stock.  (See also “Item12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters”).

 

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

 

Based solely on review of the copies of such forms either filed by uson behalf of our directors and named executive officer, or furnished to us, webelieve that all applicable Section 16(a) filing requirements weresatisfied by our directors and named executive officer during 2009.

 

***Code of Ethics***

 

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

 

A copy of our Company’s Code of Ethics isavailable on our corporate website, www.transwc.com under the CorporateGovernance tab in the Investor Relations section.  It can also be furnished to any person uponwritten request.  Requests should be sentto:  Jill A. Yarussi, CorporateSecretary, Trans World Corporation, 545 Fifth Avenue, Suite 940, New York,New York 10017.

 

**Item 11. Executive Compensation**

 

**Compensation Discussion andAnalysis**

 

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

 

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

 

·                  annual base salary,

·                  annual cash bonus,

·                  stock options,

·                  profit sharing plans,

·                  to a lesser extent, restricted stock awards, and

·                  other forms of compensation as approved by the Committee.

 

**Independent Compensation Committee.** The Compensation Committee, composed entirely of independent directors,administers our executive compensation program. The members of the Committee, Messrs. Geoffrey B. Baker, Timothy G.Ewing, Julio E. Heurtematte, Jr., and Malcolm M.B. Sterrett, meet all ofthe independence requirements under applicable laws and regulations, includingthe listing requirements of the NASDAQ stock market. None of the members is acurrent or former officer or employee of our Company or any of our subsidiariesor has any separate business relationship with the Company (other than as ashareholder). The role

 

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of the Committeeis to: (i) oversee our compensation and benefit plans and policies; (ii) administerour stock benefit plans (including reviewing and approving equity grants toexecutive officers); and (iii) review and approve annually allcompensation decisions relating to the named executive officer, Mr. RamiS. Ramadan, who serves as President, Chief Executive Officer and ChiefFinancial Officer of the Company, as set forth in the Summary CompensationTable.

 

**Role of the Named Executive Officer andManagement. **The named executive officer providesrecommendations to our Committee on matters of compensation philosophy, plandesign and the general guidelines for other executive officers’compensation.  These recommendations arethen considered by the Committee. The chief executive officer generally attendsCommittee meetings but does not vote and is not present for executive sessionsor for any discussion of his own compensation.

 

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

 

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

 

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

 

For 2009, pursuant to the evergreen renewal terms of his July 1,2005 employment agreement, Mr. Ramadan’s employment was automaticallyrenewed for a one-year term ending December 31, 2010.  The base annual salary for Mr. Ramadanwas increased to $450,000 from $400,000, effective April 1, 2008.  Base salary is considered in conjunction withthe short-term annual bonus component of our executive compensation program.

 

**Bonuses. **In addition to the 2009 Profit SharingPlan (see “Note 12 - Compensation Plans” of the Notes to the Consolidated FinancialStatements, above), a discretionary cash bonus for the named executive officeris determined by the Compensation Committee, on an annual basis, whereapplicable.  The amount of the bonus isbased on the Company’s overall performance as well as an evaluation of theindividual’s performance.  In 2008 and2009, the Compensation Committee granted individual performance awards of$135,000 and $275,000, respectively, to the named executive officer.  On February 5, 2010, the Company’sCompensation Committee recommended and the Board of Directors approved anindividual performance award of $135,000 to the named executive officer.

 

**Stock Options**.  Indetermining the size of stock option grants to executive officers, ourCommittee considers the Company’s financial performance against the strategicplan as attributed to executive officers. In this regard, our Committee granted stock options to Mr. Ramadan,the chief executive officer, on July 1, 2005, as part of his employmentcontract renewal.  Mr. Ramadan wasgranted seven-year options, to be vested over a four-year vesting period, topurchase an aggregate total of 175,000 shares of the Company’s Common Stock atthe exercise prices ranging from $2.80 at July 1, 2005, incrementallyincreasing every six months, to a maximum of $4.11 on January 1,2012.  These said options have all beenvested as of December 31, 2009 at the escalated exercise price of $3.55per share.

 

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On February 4, 2007,Mr. Ramadan was granted seven-year options to purchase 50,000 shares ofCommon 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, vestedand unvested, is set at $3.75 per share, the closing market price of the shareson the date of grant.  As of December 31,2009, options to purchase 37,500 shares have vested.

 

Further, on October 23,2007, pursuant to the Company’s 2004 Equity Incentive Plan, as amended (the “2004Equity Plan”), Mr. Ramadan was granted seven-year options to purchase125,000 shares of Common Stock, with options to purchase 25,000 shares to bevested immediately, and the balance to be vested in four equal parts, over afour-year vesting period, on the anniversary of the date of grant.  The exercise price of all these options,vested and unvested, is set at $4.85 per share, the closing stock price on October 23,2007, and escalated to $5.05 on its first anniversary.  On May 26, 2009, the Company’s Board ofDirectors froze the exercise price at $5.05 for the entire grant.  As of December 31, 2009, options topurchase 75,000 shares have vested.

 

On May 26, 2009,pursuant to the Company’s 2004 Equity Plan, as amended, our CompensationCommittee approved the grant of seven-year options to purchase an aggregate of410,000 shares of Common Stock to ten of the Company’s key managementemployees, excluding the chief executive officer, with a quarter of the totalgrant vesting immediately, and the balance to be vested in three equal partsover a three-year vesting period on the anniversary of the date of grant.  The exercise price of all these options,vested and unvested, is set at the grant date’s market closing price of $3.00per share.  The grants were inrecognition of their efforts to continually and consistently improve theperformance of the Company. (See also “Note 11 - Stock Options and Warrants” ofthe Notes to the Consolidated Financial Statements).

 

All unvested options granted hereunder will,automatically and without any further action on the part of Mr. Ramadan orany members of the Compensation Committee, terminate upon the effective date ofthe termination or expiration of his employment agreement, except that allunvested options granted thereunder will, automatically and without any furtheraction on the part of any person, vest to Mr. Ramadan upon the closingdate of a change of control (as defined by the employment agreement) of theCompany. All such vested options must be surrendered or otherwise convertedinto cash or securities of the acquiror or exercised as required or permittedby the terms and conditions of the change of control documents.  Any extension of the terms of his employmentagreement beyond December 31, 2007 will not result in the extension of anyoption grant vesting or exercise periods set forth above.

 

**Restricted Stock Awards.** Under our 2004 Equity Plan, our Committee isauthorized to grant share awards, which are a right to receive a distributionof shares of Common Stock. Shares of common stock granted pursuant to a shareaward are in the form of restricted stock which vests upon such terms andconditions as established by the Committee. Our Committee determines which officers and key employees will begranted share awards, the number of shares subject to each share award, whetherthe share award is contingent upon achievement of certain performance goals andthe performance goals, if any, required to be met in connection with a shareaward.  Non-employee directors are noteligible to receive share awards.  Underthe amended 2004 Equity Plan, our Committee has the discretion to grant anaward or awards to any one individual participant during any one calendar yearup to 250,000 shares of Common Stock and to determine whether to include aone-year vesting requirement for any future grants awarded under the 2004Equity Plan to any of our employees.  However,in no 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.

 

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Pursuant to his renewedemployment agreement and the 2004 Equity Plan, in July 2005, Mr. Ramadanwas granted 75,000 shares of restricted Common Stock that vest cumulatively,beginning with the quarter ended September 30, 2005, as follows:

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

 

Allunvested restricted stock granted hereunder will, automatically and without anyfurther 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 restrictedstock granted thereunder will, automatically and without any further action onthe part of any person, vest to Mr. Ramadan upon the closing date of achange of control (as defined in the employment agreement) of the Company. Allsuch vested restricted stock must converted into cash or securities of theacquiror as required or permitted by the terms and conditions of the change ofcontrol documents.  Any extension of theterms of his employment agreement beyond December 31, 2007 will not resultin the extension of any stock grant vesting or exercise periods set forthabove.  As of December 31, 2009,there were no shares of restricted stock vested.

 

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

 

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

 

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

 

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 

 

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Deferred Plan obligationsare payable only in the form of Common Stock upon the earlier of:   (i) a designated, in-servicedistribution date which must be a minimum of three years from the year of thefirst deferral; (ii) separation of employment; (iii) disability; (iv) changein control; or (v) death.  Aparticipant’s election form must specify whether the payments will be made bylump sum or by installments, and the number of annual installments (with aminimum of two and a maximum of five installments) as may be directed by theparticipant in his or her election form.

 

**Compensation Committee Interlocks and InsiderParticipation**

 

Nomember of the Compensation Committee has served as an officer or employee orrelated person of the Company at any time. None of the Company’s executive officers serve as a member of thecompensation committee of any other entity that has an executive officerserving as a member of our Company’s Board of Directors.  None of our Company’s executive officersserve as a member of the board of directors of any other entity that has anexecutive officer serving as a member of our compensation committee.  None of our executive officers has served asa member of the compensation committee of another entity that has an executiveofficer serving as one of our directors.

 

**Summary Compensation Table**

 

The followingtable sets forth a summary of certain information concerning the compensationawarded or paid by our Company or our subsidiaries for services rendered in allcapacities during the fiscal years ended December 31, 2009 and 2008 to theCompany’s executives, who with the exception of Mr. Ramadan, are not “executiveofficers” of the Company:

 
| **Name and Principal  Position**                          | ** ** | **Year** | ** ** | **Salary** | ** ** | **Bonus(1)** | ** ** | **Stock  Awards** | ** ** | **Option  Awards(2)** | ** ** | **Non-  Equity  Incentive  Plan  Compensation(3)** | ** ** | **Nonqualified  Deferred  Compensation  Earnings(4)** | ** ** | **All  Other  Compensation(5)** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|------------|------------|--------------|------------|-------------------|------------|-----------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------|------------|-----------|------------|
| Rami  S. Ramadan,*Chief Executive Officer*                |       | 2009     |       | $          | 450,000    |         | $          | 275,000           |       | $                     | —     |                                               | $          | 98,000                                                |       | $                               | 87,000     |      | $          | — |   | $ | 21,000 |   | $ | 931,000 |   |
|                                                      |       |     |       |       |       |         |       |              |       |                  |       |                                               |       |                                                  |       |                            |       |      |
|                                                      | 2008       |     | $          | 437,500    |       | $            | 135,000    |              |       |                  | $          | 98,000                                             |       | $                                                     | 40,100     |                            |       |      | $          | 20,000 |   | $ | 730,600 |   |
|                                                      |       |     |       |       |       |         |       |              |       |                  |       |                                               |       |                                                  |       |                            |       |      |       |
| Sarah  E. Wagner,*Director of Project Development*        |       | 2009     |       | $          | 171,000    |         | $          | 158,420           |       |                  |       | $                                                  | 4,925      |                                                  | $          | 31,500                          |       |      |       | $ | 9,900 |   | $ | 375,745 |   |
|                                                      |       |     |       |       |       |         |       |              |       |                  |       |                                               |       |                                                  |       |                            |       |      |
|                                                      | 2008       |     | $          | 158,700    |       | $            | 32,900     |              |       |                  | $          | 3,000                                              |       | $                                                     | 14,700     |                            |       |      | $          | 9,300 |   | $ | 218,600 |   |
|                                                      |       |     |       |       |       |         |       |              |       |                  |       |                                               |       |                                                  |       |                            |       |      |       |
| Thomas  Mähder,*Managing Director of Operations (6)* |       | 2009     |       | $          | 205,100    |         | $          | 89,793            |       |                  |       | $                                                  | 4,925      |                                                  | $          | 45,500                          |       |      |       | $ | 15,000 |   | $ | 360,318 |   |
|                                                      |       |     |       |       |       |         |       |              |       |                  |       |                                               |       |                                                  |       |                            |       |      |
|                                                      | 2008       |     | $          | 228,571    |       | $            |       |              |       |                  | $          | 5,400                                              |       | $                                                     |       |                            |       |      | $          | 15,000 |   | $ | 248,971 |   |
|                                                           |            |          |            |            |            |              |            |                   |            |                       |            |                                                    |            |                                                       |            |                                 |            |           |            |  |  |  |  |  |  |  |  |

 

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(1)     Represents awards based oneither personal performance evaluation and, in the case of Mr. Ramadan,also at the discretion of the Company’s Compensation Committee.

(2)     Reflects the amount expensedin accordance with accounting and reporting requirements with respect to thegranting of stock options.  For adiscussion of the assumptions used to establish the valuation of the stockoptions, reference is made to Note 2 of the Notes to the Consolidated FinancialStatements.  Additional information isalso included in the table entitled “Grants of Plan-Based Awards for the YearEnded December 31, 2009.”

(3)     Earned employee awardpursuant to the Company’s effective Profit Sharing Plan, 20% of which isdeferred into the Deferred Compensation Plan and will be paid out in CommonStock.

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

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

(6)     Mr. Mähder was hired on January 2,2008; his annual salary and bonus, if any, is paid in local currency of theCzech Republic.

 

**EquityCompensation Plans**

 

The following table sets forth certain information forall equity compensation plans and individual compensation arrangements (whetherwith employees or non-employees, such as directors) in effect as of December 31,2009.

 
| **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 plansapproved by  security holders (1)     |       | 838,745                                                                                  |       | $                                                                        | 3.72       |                                                                                                                                                        | 17,270     |   |
| Equity compensation plans notapproved by  security holders (2) |       |                                                                                     |       |                                                                     |       |                                                                                                                                                        |       |
| **Total**                                                      | ** ** | **838,745**                                                                              | ** ** | **$**                                                                    | **3.72**   | ** **                                                                                                                                                  | **17,270** | ** ** |

 

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

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

 

The followingtable sets forth information concerning grants of awards pursuant to plans madeto the named executives during the year ended December 31, 2009:

 

**Grants ofPlan-Based Awards for the Year Ended December 31, 2009**

 
| ** **         | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **         | ** ** | ** **          | ** ** | ** **       | ** ** | ** **      | ** ** | **All  Other**  | ** ** | **All  Other**          | ** ** | ** ** | ** ** | **Grant  Date** | ** ** |
|--------------------|------------|------------|------------|---------------------------------|------------|-------------------------------|------------|--------------------|------------|---------------------|------------|------------------|------------|-----------------|------------|-----------------|------------|-------------------------|------------|------------|------------|-----------------|------------|
| ** **         | ** ** | ** ** | ** ** | **Estimated  Future Payouts**   | ** ** | **Estimated  Future Payouts** | ** ** | **Stock  Awards:** | ** ** | **Option  Awards:** | ** ** | **Exercise  or** | ** ** | **Fair  Value** | ** ** |
| ** **         | ** ** | ** ** | ** ** | **Under  Non-Equity Incentive** | ** ** | **Under  Incentive**          | ** ** | **Number  of**     | ** ** | **Number  of**      | ** ** | **Base  Price**  | ** ** | **of  Stock**   | ** ** |
| ** **         | ** ** | ** ** | ** ** | **Plan  Awards (1)**            | ** ** | **Plan  Awards**              | ** ** | **Shares  of**     | ** ** | **Securities**      | ** ** | **of  Option**   | ** ** | **and Option**  | ** ** |
| ** **         | ** ** | **Grant**  | ** ** | **Threshold**                   | ** ** | **Target**                    | ** ** | **Maximum**        | ** ** | **Threshold**       | ** ** | **Target**       | ** ** | **Maximum**     | ** ** | **Stock/Units** | ** ** | **Underlying  Options** | ** ** | **Awards** | ** ** | **Awards**      | ** ** |
| **Name**           | ** ** | **Date**   | ** ** | **$000**                        | ** ** | **$000**                      | ** ** | **$000**           | ** ** | **#**               | ** ** | **#**            | ** ** | **#**           | ** ** | **#**           | ** ** | **#**                   | ** ** | **($/Sh)** | ** ** | **($/Sh)**      | ** ** |
|               |       |       |       |                            |       |                          |       |               |       |                |       |             |       |            |       |            |       |                    |       |       |       |            |       |
| Rami S. Ramadan    |       | 2009       |       | $                               | 56         |                          |       |               | $          | 226                 |       | N/A              |       | N/A             |       | N/A             |       | —                  |       | —     |       | $               | —     |   | $ | — |   |
|               |       |       |       |                            |       |                          |       |               |       |                |       |             |       |            |       |            |       |                    |       |       |       |            |       |
| Sarah E. Wagner    |       | 2009       |       | $                               | 22         |                          |       |               | $          | 86                  |       |             |       |            |       |            |       |                    |       |       |       |            |       |   |   |
|               |       |       |       |                            |       |                          |       |               |       |                |       |             |       |            |       |            |       |                    |       |       |       |            |       |
| Thomas Mähder |       | 2009       |       | $                               | 25         |                          |       |               | $          | 99                  |       |             |       |            |       |            |       |                    |       |       |       |            |       |   |   |
|                    |            |            |            |                                 |            |                               |            |                    |            |                     |            |                  |            |                 |            |                 |            |                         |            |            |            |                 |            |  |  |  |  |

 

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(1)   Pursuant to the namedexecutive officer and the other listed executives’ participation in the 2009Profit Sharing Plan.

 

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

 

**OutstandingEquity Awards at Fiscal Year-End**

 

Thefollowing table sets forth information concerning outstanding equity awardsheld by the named executives as of December 31, 2009:

 
| ** **  | ** ** | ** **                                                 | ** ** | ** **                                                            | ** ** | ** **               | ** ** | ** **             | ** ** | ** **                                                | ** ** | ** **                                                      | ** ** | ** **                             | ** ** | **Equity  Incentive  Plan Awards**      | ** ** |
|-------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|--------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|
| ** **  | ** ** | **Option  Awards**                                         | ** ** | ** **                                                            | ** ** | **Number  of  Unearned** | ** ** | **Market  Value of**   | ** ** |
| ** **  | ** ** | ** **                                                 | ** ** | **Equity  Incentive  Plan**                                           | ** ** | ** **               | ** ** | ** **             | ** ** | **Stock  Awards**                                         | ** ** | **Shares,  Units of  Stock,**                                   | ** ** | **Shares,  Units of  Stock,**          | ** ** |
| ** **  | ** ** | **Number  of Securities  Underlying Unexercised  Options** | ** ** | **Awards:  Number of  Securities  Underlying  Unexercised  Unearned** | ** ** | **Option  Exercise**     | ** ** | **Option  Expiration** | ** ** | **Number  of  Shares or  Units of  Stock That  Have Not** | ** ** | **Market  Value of  Shares or  Units of  Stock That  Have Not** | ** ** | **or  Other  Rights  That  Have  Not** | ** ** | **or  Other  Rights  That   Have  Not** | ** ** |
| **Name**    | ** ** | **Exercisable**                                            | ** ** | **Unexercisable**                                                     | ** ** | **Options**              | ** ** | **Price**              | ** ** | **Date**                                                  | ** ** | **Vested**                                                      | ** ** | **Vested**                             | ** ** | **Vested**                              | ** ** | **Vested** | ** ** |
|        |       |                                                       |       |                                                                  |       |                     |       |                   |       |                                                      |       |                                                            |       |                                   |       |                                    |       |   |   |
| Rami S.     |       | 75,000                                                     | (1)        | 50,000                                                                |       |                     |       | $                      | 5.05       |                                                      | 10/23/14   |                                                            | 75,000     | (2)                                    | $          | 225,000                                 | (3)        | — |   | $ | — |   |
| Ramadan     |       | 37,500                                                     | (4)        | 12,500                                                                |       |                     |       | $                      | 3.75       |                                                      | 02/04/14   |                                                            |       |                                   |       |                                    |       |   |   |   |
|        |       | 175,000                                                    | (5)        |                                                                  |       |                     |       | $                      | 3.55       |                                                      | 06/30/12   |                                                            |       |                                   |       |                                    |       |   |   |   |
|        |       | 1,500                                                      | (6)        |                                                                  |       |                     |       | $                      | 3.30       |                                                      | 07/12/14   |                                                            |       |                                   |       |                                    |       |   |   |   |
|        |       | 1,500                                                      | (6)        |                                                                  |       |                     |       | $                      | 6.00       |                                                      | 07/12/13   |                                                            |       |                                   |       |                                    |       |   |   |   |
|        |       | 1,500                                                      | (6)        |                                                                  |       |                     |       | $                      | 5.00       |                                                      | 07/12/12   |                                                            |       |                                   |       |                                    |       |   |   |   |
| Sarah E.    |       | 15,000                                                     | (7)        | 45,000                                                                |       |                     |       | $                      | 3.50       |                                                      | 05/26/16   |                                                            |       |                                   |       |                                    |       |   |   |   |
| Wagner      |       | 10,000                                                     | (7)        |                                                                  |       |                     |       | $                      | 2.50       |                                                      | 08/02/13   |                                                            |       |                                   |       |                                    |       |   |   |   |
|        |       | 300                                                        | (7)        |                                                                  |       |                     |       | $                      | 3.00       |                                                      | 01/01/14   |                                                            |       |                                   |       |                                    |       |   |   |   |
| Thomas C.   |       | 5,000                                                      | (8)        | 5,000                                                                 |       |                     |       | $                      | 4.10       |                                                      | 01/04/15   |                                                            |       |                                   |       |                                    |       |   |   |   |
| Mähder |       | 11,250                                                     | (8)        | 33,750                                                                |       |                     |       | $                      | 3.50       |                                                      | 05/26/16   |                                                            |       |                                   |       |                                    |       |   |   |   |
|             |            |                                                            |            |                                                                       |            |                          |            |                        |            |                                                           |            |                                                                 |            |                                        |            |                                         |            |  |  |  |  |  |

 

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(1)       On October 23,2007, pursuant to the Company’s 2004 Equity Plan, as amended, Mr. Ramadanwas granted seven-year options to purchase 125,000 shares of Common Stock, withoptions to purchase 25,000 shares vested immediately, and the balance to bevested in equal parts, over a four-year vesting period, on the anniversary ofthe date of grant.  The exercise price ofall these options, vested and unvested, is set at $4.85 per share, the marketclosing stock price on October 23, 2007, and escalated to $5.05 on itsfirst anniversary.  On May 26, 2009,the Company’s Board of Directors froze the exercise price at $5.05 for theentire grant.

(2)       The restricted shares vestaccording to an earnings formula as stipulated in Mr. Ramadan’s employmentagreement. (See “Compensation Discussion and Analysis - Restricted Stock Awards”above).

(3)       Based upon the fair marketvalue represented by the reported closing price on the over-the-counterbulletin board of $3.00 per share for the Company’s Common Stock as of December 31,2009.

(4)       On February 4, 2007, Mr. Ramadanwas granted seven-year options to purchase 50,000 shares of Common Stock, withoptions to purchase 12,500 shares vested immediately, and the balance to bevested in equal parts, over a three-year vesting period, on the anniversary ofthe date of grant.  The exercise price ofthese options was set at $3.75 per share.

(5)       On July 1, 2005, Mr. Ramadanwas granted seven-year options to purchase 175,000 shares of Common Stock, withoptions to purchase 35,000 shares to be vested immediately, and the balance tobe vested in equal parts, over a four-year vesting period, on the anniversaryof the date of grant.  The exercise priceof these options incrementally increases every six months, starting at $2.80,the closing market price on July 1, 2005, to a maximum of $4.11 on January 1,2012.

(6)       Options to purchase anaggregate of 4,500 shares of Common Stock granted under the previous employmentagreement have already vested. (See “Compensation Discussion and Analysis -Stock Options” above).

(7)       On May 26, 2009, Ms. Wagnerwas granted seven-year options to purchase 60,000 shares of Common Stock, ofwhich options to purchase 15,000 shares vested immediately, and the balance tobe vested in equal parts, over a three-year vesting period, on the anniversaryof the date of grant.  The exercise priceof these options was set at $3.50 per share, the market closing price at thedate of grant.  As of December 31,2009, options to purchase an aggregate of 10,300 shares of Common Stock havealready vested.

(8)       On January 4, 2008, Mr. Mähderwas granted seven-year options to purchase 10,000 shares of Common Stock, withoptions to purchase 2,500 shares vested immediately, and the balance to bevested in equal parts, over a three-year vesting period, on the anniversary ofthe date of grant.  The exercise price ofthese options was set at $4.10 per share, the market closing price at the dateof grant.  On May 26, 2009, Mr. Mähderwas granted seven-year options to purchase 45,000 shares of Common Stock, withoptions to purchase 11,250 shares vested immediately, and the balance to bevested in equal parts, over a three-year vesting period, on the anniversary ofthe date of grant.  The exercise price ofthese options was set at $3.50 per share, the market closing price at the dateof grant.

 

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**OptionExercises and Stock Vested**

 

No stock optionswere exercised and no shares of restricted stock vested for the named executiveofficer or for the other executives in 2009.

 

**NonqualifiedDeferred Compensation**

 

Neither the named executive officer nor the other named executives earnedany nonqualified deferred compensation in 2009.

 

**Employmentand Change of Control Agreements**

 

We extended theemployment agreement with Mr. Ramadan in 2009, pursuant to which theCompany agreed to employ Mr. Ramadan as President, Chief Executive Officerand Chief Financial Officer for another year ending on December 31,2010.  For additional information, see “CompensationDiscussion and Analysis - Employment/Severance Agreements” below.

 

Our Company, aspart of an employment agreement renewal, amended the change of controlagreement with Mr. Ramadan.  See “CompensationDiscussion and Analysis — Additional Components of Executive Compensation”above.

 

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**Potential Payments upon Termination of Employment or a Change inControl**

 

The followingtable describes the potential payments to Mr. Ramadan, the named executiveofficer, upon an assumed termination of employment or a change in control as ofDecember 31, 2009:

 
| **Payments  and Benefits**                              | ** ** | **Voluntary Termination** | ** ** | **Termination  for Cause** | ** ** | **Involuntary  Termination  Without Cause or  Termination by the  Executive for Good  Reason With a  Change in Control** | ** ** | **Material  Breach of  Agreement  by  Company** | ** ** | **Death or  Disability** | ** ** |
|---------------------------------------------------------|------------|---------------------------|------------|----------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|--------------------------|------------|
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Accrued vacation pay (a)                                |       | $                         | —     |                       | $          | —                                                                                                                   |       | $                                               | —     |                     | $          | — |   | $ | — |   |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Accrued sick pay (b)                                    |       | 10,000                    |       | 10,000                     |       | 10,000                                                                                                                   |       | 10,000                                          |       | 10,000                   |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Severance payments and benefits: (c)                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Cash severance (d)                                      |       |                      |       |                       |       | 450,000                                                                                                                  |       | 450,000                                         |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Medical and dental benefits (e)                         |       |                      |       |                       |       | 22,000                                                                                                                   |       | 22,000                                          |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Equity awards:                                          |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Vested stock options and restricted stock awards  (f)   |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Unvested stock options and restricted stock awards  (g) |       |                      |       |                       |       | 225,000                                                                                                                  |       |                                            |       |                     |       |
|                                                    |       |                      |       |                       |       |                                                                                                                     |       |                                            |       |                     |       |
| Total payments and benefits                             |       | $                         | 10,000     |                       | $          | 10,000                                                                                                                   |       | $                                               | 707,000    |                     | $          | 482,000 |   | $ | 10,000 |   |

 

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(a)   There was noaccrued and unused vacation time due to Mr. Ramadan as of December 31,2009.

(b)   Represents a total of sixunused sick days.

(c)   These severance payments andbenefits are payable if Mr. Ramadan’s employment is terminated either (i) bythe Company for any reason other than cause, disability or death or (ii) byMr. Ramadan after a change in control of the Company and if the Companytakes certain adverse actions (a “good reason” termination) or if the Companymaterially breaches the employment agreement and does not cure such breachwithin 30 days after the date of termination.

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

(e)   Represents the estimatedpresent value cost of providing continued medical and dental coverage to Mr. Ramadanfor an assumed period ending at the earlier of (i) the date he is entitledto receive 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, 2009.

(f)    All vested stock options andrestricted stock awards are exercisable as set forth in Mr. Ramadan’semployment agreement or the plans under which they were granted, except upon achange in control, in which case, they must be surrendered, or otherwiseconverted into cash or securities of the acquirer, or exercised as required, orpermitted by the terms and conditions of the change in control documents.  The vested stock options were “under water,”based on the December 31, 2009 reported closing price of the Company’sCommon Stock of $3.00 per share and no shares of the restricted stock hadvested as such date.

(g)   All unvested stock optionsand unvested restricted stocks will terminate upon the termination orexpiration of the employment agreement except upon a change of control in whichcase they will vest on the closing date of change of control. The unvestedstock options would be “under water,” based on the December 31, 2009reported closing price of the Company’s Common Stock of $3.00 per share, whilethe restricted stock would be worth approximately $225,000.

 

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**Directors’Compensation**

 

Effectivebeginning the quarter ended September 30, 2003, our non-employee directors’compensation has included a cash retainer fee of $6,250 per quarter, permember.  On January 23, 2009, thecash retainer fee was increased to $7,500 per quarter, per member, retroactiveto January 1, 2009.  In addition,the non-executive chairman of our Board receives an additional $1,250 perquarter, while each chairman of our three Committees receives $625 perquarter.  To recognize the burden andimportance of the Audit Committee, effective June 30, 2006, each member ofthis Committee has been compensated an additional $1,250 per quarter.  In connection with this change, the automaticgrant of a non-qualified option to purchase 25 shares of Common Stock on thedate following each fiscal quarter in which the director serves waseliminated.  All members of the Board arereimbursed for out-of-pocket expenses in connection with attending Boardmeetings.  Full-time employee directorsof our Company do not receive any fees for board or committee meetings.

 

The followingtable sets forth information concerning compensation paid or accrued by ourCompany to each member of the Board of Directors during the year ended December 31,2009.  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** | ** ** | **Nonqualified  Deferred  Compensation   Earnings** | ** ** | **All Other  Compensation** | ** ** | **Total** | ** ** |
|--------------------------------|------------|----------------------------------------|------------|-------------------|------------|-----------------------|------------|----------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------|------------|-----------|------------|
| Geoffrey B. Baker              |       | $                                      | 35,000     |              | $          | —                |       | $                                            | —     |                                                | $          | —                      |       | $         | —     |   | $ | — |   | $ | 35,000 |   |
|                           |       |                                   |       |              |       |                  |       |                                         |       |                                                |       |                        |       |      |       |
| Timothy G. Ewing               |       | $                                      | 33,972     |              |       |                  |       |                                         |       |                                                |       |                        |       |      | $          | 33,972 |   |
|                           |       |                                   |       |              |       |                  |       |                                         |       |                                                |       |                        |       |      |       |
| Julio E. Heurtematte, Jr. |       | $                                      | 35,000     |              |       |                  |       |                                         |       |                                                |       |                        |       |      | $          | 35,000 |   |
|                           |       |                                   |       |              |       |                  |       |                                         |       |                                                |       |                        |       |      |       |
| Malcolm M.B. Sterrett          |       | $                                      | 37,500     |              |       |                  |       |                                         |       |                                                |       |                        |       |      | $          | 37,500 |   |
|                                |            |                                        |            |                   |            |                       |            |                                              |            |                                                     |            |                             |            |           |            |  |  |  |  |  |  |  |

 

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(1)   Includes paymentof directors’ retainer fees for service on the board of the Company.  Also includes the payment of fees for serviceas chairman of a board committee. Pursuant to the Company’s adoption of the Deferred Compensation Plan in June 2006,each director elected to defer a portion of his quarterly retainer, which, forthe year ended December 31, 2009, was $2,500 each for Mr. Baker, Mr. Ewing,Mr. Heurtematte and Mr. Sterrett, respectively.  Furthermore, Mr. Sterrett receives anadditional $2,500 as remuneration for being the Chairman of the Board ofDirectors.  Mr. Ewing resigned fromthe Audit Committee on October 16, 2009.

 

(2)   Reflects the amount, if any,expensed in accordance with accounting and reporting requirements during fiscal2009 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 12 ofthe “Notes to the Consolidated Financial Statements” of the Company includedelsewhere here.

 

**Employment/SeveranceAgreements**

 

On December 31, 2009, our Company extended Mr. Ramadan’semployment agreement, originally dated July 1, 2005, pursuant to which weagreed to employ him as President, Chief Executive Officer and Chief FinancialOfficer for a renewable term of one year, ending December 31, 2010, with acurrent base annual salary of $450,000, 

 

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which was increased from $400,000 effective April 1,2008.  Mr. Ramadan willcontinue to be eligible to participate in the 2004 Equity Plan and any presentor future employee benefit plans, including the 2009 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’s extended agreementand shown in the “Stock Options” and “Restricted Stock Awards” sections above,he received:  (i) a grant ofseven-year options to purchase an aggregate total of 175,000 shares of theCompany’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.  On February 4, 2007, Mr. Ramadanwas granted seven-year options to purchase 50,000 shares of Common Stock, withoptions to purchase 12,500 shares to be vested immediately, and the balance tobe vested in equal parts, over a three-year vesting period, on the anniversaryof the date of grant.  The exercise priceof these options was set at $3.75 per share. On October 23, 2007,pursuant to the Company’s 2004 Equity Plan, as amended, Mr. Ramadan wasgranted 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 equal parts, over a four-year vesting period, on the anniversaryof the date of grant.  The exercise priceof all these options, vested and unvested, is set at $4.85 per share, themarket closing stock price on October 23, 2007, and escalated to $5.05 onits first anniversary.  On May 26,2009, the Company’s Board of Directors froze the exercise price at $5.05 forthe entire grant.

 

In the event theemployment agreement is terminated without cause, or if he terminates hisemployment agreement after a change in control for good reason, as defined inthe agreement, Mr. Ramadan will receive one year’s salary.  The agreement is also subject to numeroustermination provisions in the event of death, disability, discharge for cause,and material breach thereof.  Inaddition, if our Company terminates the agreement without cause, materiallybreaches the employment agreement and does not cure such breach, or if Mr. Ramadanterminates the employment agreement after a change in control for good reason,we will continue to provide Mr. Ramadan with his medical insurancebenefits then in effect until the date of the earlier of the commencement ofhis full time employment with another employer, or the first anniversary dateof the termination date of the employment agreement.  Further, the employment agreement providesthat unless either the Company or Mr. Ramadan notifies the other ofits/his intent not to extend the term on or prior to September 30, 2009 oron or prior to each September 30th thereafter, then the term will beautomatically extended for a period of one year to the next December 31st.  Accordingly,the term of Mr. Ramadan’s employment agreement was, as of October 1,2009, automatically extended to December 31, 2010.

 

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**Item 12.  Security Ownership ofCertain Beneficial Owners and Management and Related Stockholder Matters.**

 

The following table setsforth information regarding the beneficial ownership of our Common Stock as of February 28,2010 (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                             | %          |
| Special Situations Funds (3)                                         |       | 2,081,008                                                     |       | 23.5                             |       |
| Wynnefield Funds (4)                                                 |       | 1,160,548                                                     |       | 13.1                             |       |
| SC Fundamental Funds (5)                                             |       | 468,735                                                       |       | 5.3                              |       |
| Rami S. Ramadan (6)                                                  |       | 441,106                                                       |       | 4.7                              |       |
| Julio E. Heurtematte, Jr. (7)                                   |       | 27,358                                                        |       | *                                |       |
| Malcolm M.B. Sterrett (8)                                            |       | 27,358                                                        |       | *                                |       |
| Geoffrey B. Baker (9)                                                |       | 27,358                                                        |       | *                                |       |
| Timothy G. Ewing (10)                                                |       | 3,343,026                                                     |       | 37.6                             |       |
| All directors and the executive officer as a group  (5 persons) (11) |       | 3,866,206                                                     |       | 41.4                             | %          |

 

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*              Less than 1% of the issuedand outstanding shares of the Company’s Common Stock.

 

(1)   The percentage of outstandingshares is based on 8,871,640 shares outstanding as of February 28, 2010and, for certain individuals and entities, on reports filed with the SEC or oninformation provided directly to our Company by such individuals or entities. Aperson is deemed to be the beneficial owner of securities that can be acquiredby such person within 60 days from February 28, 2010 upon the exercise ofoptions. Each beneficial owner’s percentage ownership is determined by assumingthat options that are held by such person (but not those held by any otherperson) are exercisable within 60 days from February 28, 2010 have beenexercised. Included are shares of Common Stock issuable upon the exercise ofoptions to purchase the Company’s Common Stock.

 

(2)   Value Partners, Ltd. is aTexas limited partnership, managed by Ewing & Partners, whose businessaddress is 4514 Cole Avenue, Suite 740, Dallas, Texas 75205. Mr. TimothyG. Ewing, a director of TWC, is the controlling person of Value Partners, Ltd.

 

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

 

(4)   Wynnefield Partners Small CapValue LP and Wynnefield Partners Small Cap Value LP I are managed by WynnefieldCapital Management, LLC, while Wynnefield Small Cap Value Offshore Fund, Ltd ismanaged by Wynnefield Capital, Inc.. Wynnefield Capital Management, LLC (“WCM”) and Wynnefield Capital, Inc.(“WCI”) are private investment firms, whose same address is 450 Seventh Avenue,Suite 509, New York, New York 10123. Nelson Obus and Joshua Landes share voting and investment control overthe portfolio securities of WCM and WCI. In addition, Mr. Obus beneficially owns Channel Partnership II,LP., thereby controlling in aggregate 1,160,548 shares of the Company’s Common Stock,while Mr. Landes controls 1,513,248 shares of Common Stock.  1,335,353 of these said shares were acquiredas a result of 

 

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theirparticipation in TWC’s two private placements. Currently, Wynnefield Small Cap Value Offshore Fund, Ltd. beneficiallyowns 364,248 shares of Common Stock; Wynnefield Partners Small Cap Value LPbeneficially owns 313,500 shares of Common Stock; Wynnefield Partners Small CapValue LP I beneficially owns 475,500 shares of Common Stock; and ChannelPartnership II LP beneficially owns 7,300 shares of Common Stock.

 

(5)   SC Fundamental Value Funds LP(“SCFVF”) and SC Fundamental Value BVI, Ltd (“SCFVBVI”), collectively referredto as SC Fundamental Value Funds, whose address is 747 Third Avenue, 27th Floor, New York, New York 10017, wereparticipants in TWC’s private placements in December 2005.  SCFVF is managed by SC Fundamental LLC, as generalpartner, and beneficially owns 211,890 shares of Common Stock, while SCFVBVI ismanaged by SC BVI Partners, as investment advisor, and beneficially owns256,845 shares of Common Stock.

 

(6)   Consists of 3,500 shares ofCommon Stock, 354,500 shares subject to incentive options granted to Mr. Ramadan,of which 292,000 have vested, 8,106 shares issuable under the DeferredCompensation Plan, plus 75,000 shares of restricted stock, none of which havevested. (See “Item 11.  ExecutiveCompensation,” above)

 

(7)   Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock subject to non-qualified ten-yearoptions granted under the Company’s 1999 Non-Employee Director Stock OptionPlan (the “1999 Director Plan”) (which was subsequently merged into the 2004Equity Plan) at the end of each calendar quarter ended March 31, 1999through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified ten-year options granted under the 1999 Director Plan at the endof 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. Heurtematte’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. Heurtematte also has 2,714 sharesissuable under the Deferred Compensation Plan, for which he annuallycontributed a portion of his retainer fees.

 

(8)   Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock, subject to non-qualified ten-yearoptions, granted under the 1999 Director Plan (which was subsequently merged intothe 2004 Equity Plan) at the end of each calendar quarter ended since March 31,1999 through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified ten-year options granted under the 1999 Director Plan at the endof 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.  Mr. Sterrett also has 2,714 sharesissuable under the Deferred Compensation Plan, for which he annuallycontributed a portion of his retainer fees.

 

(9)   Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock, subject to non-qualified options,granted under the 1999 Director Plan (which was subsequently merged into the2004 Equity Plan) for the calendar quarter ended March 31, 1999; 20 sharesof Common Stock subject to non-qualified ten-year options granted under the1999 Director Plan at the end of each quarter ended since September 30,1999 through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified ten-year options granted under the 1999 Director Plan at the endof 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. 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.  Mr. Baker also has 2,714 shares issuableunder the Deferred Compensation Plan, for which he annually contributed aportion of his retainer fees.

 

(10)Mr. Timothy G. Ewing isthe managing partner of Ewing & Partners, which manages ValuePartners, Ltd.  His beneficial ownershipincludes 3,326,679 shares of Common Stock, held by Value Partners, Ltd. (Seealso Note (2) above).  Effective thequarter ended September 30, 2006, as part of Mr. Ewing’sparticipation in the Company’s Deferred Compensation Plan, quarterly optiongrants were terminated for members of the Board of Directors in lieu of anominal increase in the annual retainer, of which a minimum of 25% is allocatedto the Deferred Compensation Plan.  Inaddition to his beneficial ownership of Value Partners, Mr. Ewing also has16,347 shares issuable under the Deferred Compensation Plan, for which heannually contributed a portion of his retainer fees.

 

(11)See Notes (6), (7), (8), (9) and(10) above.

 

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**Item 13.  Certain Relationshipsand Related Transactions, and Director Independence.**

 

With respect to thedetermination of director independence, please see Part III, Item 10.Directors, Executive Officers and Corporate Governance — “Information about ourBoard and its Committees.”

 

The Company did notengage in any transactions during 2009, and has no plans to engage in anytransactions during 2010, in excess of $120,000 in which any director,executive officer or shareholder owning 5% or more of the Common Stock (a “5%shareholder”) of the Company or any immediate family member of any director,executive officer or 5% shareholder of the Company had or has a direct orindirect material interest.

 

**Item 14.  Principal AccountingFees and Services.**

 

Rothstein, Kass &Co., P.C., our principal independent accountants, provided audit and non-auditservices to the Company in 2009 and 2008, which are described below.  We have been advised by Rothstein, Kass &Co., P.C. that neither that firm nor any of its associates has any relationshipwith our Company or its subsidiaries other than the usual relationship thatexists between independent accountants and clients.

 

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

 

The following table shows the fees that werebilled to the Company by Rothstein, Kass & Co., P.C. for professionalservices rendered for the fiscal years ended December 31, 2009 and December 31,2008.

 
| **Fee Category**   | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit Fees         |       | $        | 190,000    |     | $          | 170,000 |   |
|               |       |     |       |     |       |   |   |
| Audit-related Fees |       | 10,000   |       | 8,000    |       |
|               |       |     |       |     |       |
| Tax Fees           |       | 35,000   |       | 30,000   |       |
|               |       |     |       |     |       |
| All Other Fees     |       |     |       |     |       |
|               |       |     |       |     |       |
| Total Fees         |       | $        | 235,000    |     | $          | 208,000 |   |

 

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

 

**Audit-Related Fees. **Thiscategory includes fees for assurance and related services that are reasonablyrelated to the performance of the audit or review of the Company’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 category includesall other fees not included in the above three categories.

 

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**PART IV**

 

**Item15. Exhibits, Financial Statement Schedules.**

** **

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

 

Referenceis made to the Exhibit Index hereinafter contained.

 

A copy of any exhibits listed or referred to herein will be furnishedat a reasonable cost to any person who was a shareholder of our Company as of February 28,2010, upon written request from any such person. Requests should be sent to:Jill A. Yarussi, Corporate Secretary, Trans World Corporation, 545 FifthAvenue, Suite 940, New York, New York 10017.

 

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**TRANS WORLD CORPORATIONEXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2009**

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

 

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

 

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| 10.12  |   | Waiver and Forbearance  of Covenant Violations (Interest) — Finance Indenture                                                                           |   | Incorporated  by reference to Exhibit 10.12 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                                                                                                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.13  |   | Indemnification  Agreement by and between Value Partners, Ltd., Trans World Corporation and  TWG International U.S. Corporation dated February 12, 2003 |   | Incorporated  by reference to Exhibit 10.13 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.14  |   | Agreement and Plan of  Recapitalization dated June 25, 2003 between the Company and the named  Holders                                                  |   | Incorporated  by reference to Exhibit 4.9 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.15  |   | Form of 8% Rate  Promissory Note due 2006                                                                                                               |   | Incorporated  by reference to Exhibit 4.10 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.16  |   | Form of Variable  Rate Promissory Note due 2010                                                                                                         |   | Incorporated  by reference to Exhibit 4.11 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.17  |   | 2004  Equity Incentive Plan, as amended                                                                                                                      |   | Incorporated  by reference to Appendix E contained in the Proxy Statement for the 2004  Annual Meeting and from the discussion contained at page 12-14 of the proxy  statement for the 2005 Annual Meeting, at page 14-15 of the proxy statement  for the 2006 Annual Meeting, and at page 14-15 of the proxy statement  for the 2007 Annual Meeting (File No. 0-25244). |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.18  |   | Renewal  and Amendment of Employment Agreement between the Company and Rami S.  Ramadan, Effective as of July 1, 2005                                   |   | Incorporated  by reference to Exhibit 10.18 contained in the Form 10-KSB filed on  March 17, 2006 (File No. 0-25244).                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 14.0   |   | Code  of Ethics                                                                                                                                              |   | Incorporated  by reference to Exhibit 14.0 contained in the 2008 Proxy Statement filed  on May 14, 2008 (File No. 0-25244).                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.0   |   | Subsidiaries                                                                                                                                                 |   | Filed  herewith.                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 23.0   |   | Consent  of Rothstein, Kass & Company, P.C., Independent Registered Public  Accounting Firm                                                         |   | Filed  herewith - on page 24 of this report.                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.0   |   | Section 302  Certification of Chief Executive Officer and Chief Financial Officer                                                                       |   | Filed  herewith.                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.0   |   | Section 906  Certification of Chief Executive Officer and Chief Financial Officer                                                                       |   | Filed  herewith.                                                                                                                                                                                                                                                                                                                                                                             |

 

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**SIGNATURES**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this Report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                               | **TRANS  WORLD CORPORATION** |
|------------------------------------|------------------------------|
|                               | (Registrant)                 |
|                               |                         |   |
|                               |                         |   |
| Dated:  *March 10, 2010* |                         |   |
|                               | 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 Registrant on *March 10, 2010*in the capacities indicated.

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

 

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