Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

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

For the quarterly period ended June 30, 2011

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

For the transition period from                                      to                                           .

Commission File No.:  0-25244

TRANS WORLD CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code: (212) 983-3355

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x  NO o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o  NO x

The number of outstanding shares of the registrant’s common stock as of August 4, 2011 was 8,871,640.

Table of Contents

TRANS WORLD CORPORATION AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2011

INDEX

PART 1 – FINANCIAL INFORMATION

i

Table of Contents

ITEM 1.  FINANCIAL STATEMENTS

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2011 and December 31, 2010

(in thousands, except for share data)

See accompanying notes to condensed consolidated interim financial statements.

1

Table of Contents

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Six and Three Months Ended June 30, 2011 and 2010

(in thousands, except for share data)

See accompanying notes to condensed consolidated interim financial statements.

2

Table of Contents

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2011 and 2010

(in thousands)

See accompanying notes to condensed consolidated interim financial statements.

3

Table of Contents

TRANS WORLD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

(all figures in thousands, except for exchange rate and share data)

1.              Basis of Presentation and Consolidation.

The accompanying unaudited condensed consolidated interim financial statements of Trans World Corporation and Subsidiaries (collectively, the “Company,” “TWC,” “we,” “our” or “us”) as of June 30, 2011 and December 31, 2010 and for the six and three months ended June 30, 2011 and 2010 reflect all adjustments of a normal and recurring nature to fairly present the consolidated financial position, results of operations and cash flows for the interim periods. The financial statements of all foreign subsidiaries consolidated herein have been converted in accordance with accounting principles generally accepted in the United States of America (“US GAAP” or “GAAP”) for financial presentation purposes. All significant intercompany transactions and account balances have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements have been prepared by the Company according to the instructions of Form 10-Q and pursuant to the U.S. Securities and Exchange Commission’s (“SEC”) accounting and reporting requirements under Regulations S-X and S-K. Pursuant to these instructions, certain financial information and footnote disclosures normally included in such consolidated financial statements have been condensed or omitted.

In management’s opinion, all adjustments considered necessary for fair presentation of financial position, results of operations and cash flows of the Company have been included. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with management’s discussion and analysis, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The results of operations for the six and three months ended June 30, 2011 are not necessarily indicative of the results that may occur for the year ending December 31, 2011.

The condensed consolidated balance sheet as of December 31, 2010 was derived from the Company’s audited financial statements but does not include all disclosures required by US GAAP.  All monetary amounts set forth in these financial statements are in United States dollars (“USD” or “$”) unless otherwise stated herein.

2.              Nature of Business

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

The Company owns and operates four casinos in the Czech Republic (“CZ”), and manages, under contract, one casino and nightclub in Croatia, all under the American Chance Casinos (“ACC”) brand.  Two of the Czech casinos are located in the western part of the CZ, close to the German border.  The larger of these two, located in Ceska Kubice (“Ceska”), currently has 15 gaming tables and 80 slot machines. The smaller, Rozvadov (“Rozvadov”), located in the town of Rozvadov, currently has eight gaming tables and 24 slot machines.  The other two Czech casinos are located in the southern part of the CZ, close to the Austrian border.  The larger of these two, “Route 55,” located in Dolni Dvoriste, has 23 gaming tables and 124 slot machines.  The other casino, “Route 59,” is located in Hate, near Znojmo, and currently has 23 gaming tables and 114 slot machines.

The Company also manages under contract the Grand Casino Lav and Nightclub (collectively known as the “Grand Casino Lav”), located in Podstrana, Croatia, near the resort city of Split.  The management agreement with Grand Hotel Lav d.o.o., the property owner, provides for a 10-year term expiring in 2017, with renewal periods of five years at TWC’s option, subject to certain performance conditions.   In addition to marketing to the existing hotel guests, the Company targets the local market of Split, the second largest city in Croatia. Grand Casino Lav currently has 18 tables and 60 slot machines.

4

Table of Contents

3.              Commitments and Contingencies.

Lease Obligations - The Company is obligated under several operating leases expiring through 2018.  Future aggregate minimum annual rental payments under all of these leases for the next five years are as follows:

Rent expense under all of these operating leases was approximately $62 and $58 for the six months ended June 30, 2011 and 2010, respectively.

The Company is also obligated under certain five-year, slot equipment operating leases, the projected costs of which are not included in the table above due to fluctuating inventory, expiring in 2011 and 2012, which provide for a monthly fixed rental fee per slot machine, and an option for replacement to a different/newer machine during the term of the lease.  In the second quarter of 2011, the Company’s slot lease expenses were approximately $670 versus $531 in the comparable period in 2010, while for the first six months of 2011, they were $1,304 versus $1,116 for the comparable period in 2010.

Employment Agreements - The Company’s July 1, 2005 employment agreement with its Chief Executive Officer (“CEO”), Mr. Rami S. Ramadan, absent the intervention of either party by September 30th of each year, will renew automatically for another calendar year, currently ending December 31, 2011. In addition to a perpetually renewable employment term of one year absent the intervention of either party, the agreement provides for annual compensation, plus participation in the Company’s benefits programs and equity incentive plans. As of June 30, 2011, approximately $225 of annual compensation remained payable in 2011.

401(k) and Profit Sharing Plan - The Company maintains a contributory 401(k) plan and a profit sharing plan.  These plans are for the benefit of all eligible corporate employees, who may have up to 16.5% of their salary withheld, not to exceed the maximum federally allowed amount.  The Company makes an employer-matching contribution of 60 cents for each employee dollar contributed.

Notes Receivable - In connection with TWC’s management of the Grand Casino Lav, on January 10, 2007, the Company extended three Euro-denominated (“EUR”) loans totaling EUR 967, or $1,400, to Grand Hotel Lav, d.o.o., the owner of the Grand Casino Lav and Nightclub. In light of the slower than expected growth of the operation and the cash flow management challenges experienced during the low seasons by the Grand Hotel Lav, d.o.o. (“GHL”), in December 2009, TWC agreed to a proposal from the owners of Grand Casino Lav to consolidate the three outstanding loans and accrued interest and penalties into a single, three-year, 3.55% per annum interest, term loan (the “Replacement Loan”), effective January 1, 2010, excluding accrued management fees. The Replacement Loan principal amount was approximately EUR 875, or approximately $1,300. Principal payments associated with the loan were deferred in 2010. Monthly payments for the Replacement Loan commenced May 31, 2010, with a four-month, interest-free grace period and continued through October 2010. In December 2010, TWC acquiesced to GHL’s request to defer additional installments for three months due to a seasonal drop in business. In addition to liens on gaming equipment, the Replacement Loan is secured by nine legally-binding receivable (demand) notes, which can be presented at any time to the owner’s bank for the satisfaction of the Replacement Loan. In the event of a sale of the business, the Replacement Loan would be assumed by the new owner. TWC management believes the loan is fully collectible.

Advance Receivable - In August 2009, in pursuit of obtaining a gaming license in Hungary, TWC partnered with Vigotop Limited, a Cyprus-based company, to form a Hungarian company, KC Bidding Kft. (“KCB”), in which TWC became holder of a 25% equity interest. Subsequently, TWC extended KCB a three-year, 1.0% interest per annum loan of approximately EUR 930, or approximately $1,300, to form a Hungarian license concession company, SDI Europe Kft. (“SDI”), for the purpose of eventually operating the Class I casino in Hungary. SDI is a wholly-owned subsidiary of KCB. Through SDI’s intermediary, IMT LLC (“IMT”), a Delaware-incorporated company, TWC received a three-year, 2.1505% interest per annum loan of approximately $1,300. TWC expects the full lump

5

Table of Contents

sum repayment of the loan, upon maturity, from KCB, to offset its outstanding loan with IMT LLC. TWC management believes the loan to KCB is fully collectible. In the event KCB defaults in its repayment obligation to ACC with respect to the above mentioned loan, IMT will cancel the loan obligation from ACC to IMT and ACC will no longer be obligated to pay off the loan principal of approximately EUR 930, or $1,300. In November 2010, the loan agreement between ACC and KCB was amended to change the maturity date to January 31, 2016 from December 31, 2012 and to establish an interest rate of 1.0% from January 1, 2012 through the new maturity date of the loan. On March 5, 2011, the loan agreement between IMT and ACC was amended to change the maturity date to February 21, 2016 from January 31, 2013, and to establish an interest rate of 1.0% from January 1, 2012 through the new maturity date of the loan.

TWC’s development and operations teams in Europe played key roles in the award process, providing critical industry expertise and technical support to the majority owner of KCB, Vigotop. In exchange for TWC’s services to obtain a gaming license, the Company received the aforementioned ownership stake in KCB, from which there is a potential for the Company to earn a fee by means of a structured buyout by Vigotop. Under the terms of the buyout option agreement, which expires on August 14, 2012, TWC’s minority interest in KCB is subject to acquisition by Vigotop, at Vigotop’s option, through the purchase of TWC’s shares in KCB for approximately $1,300, which would represent TWC’s fee for services rendered.

Since January 12, 2011, KCB has had several letter correspondences with the Ministry for the National Economy of Hungary (the “MOE”). The first letter declared that the State of Hungary was terminating the concession contract that was concluded between the parties on October 9, 2009 for alleged breaches of the terms of the concession contract by the concession holder. Further, in this letter, the Hungarian government demanded payment of a cancelation penalty in the amount of 900,000 Hungarian Forint (“HUF”), approximately $4,500. The second letter was a demand for a penalty payment in the amount of HUF 864,500 plus interest in the amount of HUF 380,400, approximately $6,220 in aggregate, regarding an alleged claim of non-compliance with update reports on the progress of the King’s City development project that were due in January 2010 and July 2010.  KCB has responded to the MOE, challenging the reasons provided by the MOE for the immediate cancelation of the concession contract and argued that the terms on which the cancelation was based were wrongful and disputed the MOE’s claim that such progress reports were due during 2010.

On April 26, 2011, KCB received a court summons for a hearing, which was originally scheduled for January 17, 2012 but has since been moved up to August 30, 2011.  KCB’s attorneys are drafting a statement of defense for this hearing. In its letters and statement of defense, KCB is accusing the Hungarian government of acting in bad faith and is prepared to take the appropriate legal actions if necessary.  KCB’s attorneys believe that KCB has a strong legal case against the MOE. Notwithstanding the foregoing, litigation results are never predictable. Further, by virtue of an existing agreement between Vigotop and TWC, all costs associated with obtaining the casino license were and will be borne by Vigotop. In the opinion of TWC’s management, after consultation with legal counsel, the amount of ultimate liability with respect to these actions will not materially affect the Company’s consolidated financial statements and/or results of operations.

If the MOE is successful in terminating the concession contract, it would be highly unlikely that any buyout would occur and very likely that KCB would become insolvent, resulting in the loss of TWC’s entire non-cash investment. In the event that Vigotop does not exercise its buyout option, the shareholders of KCB will continue their ongoing development of the casino project until the license has been granted, and it is possible that the Company could ultimately manage the mega casino under its American Chance Casinos brand. There are no assurances that TWC would be selected to manage this future operation, if and when completed.

Taxing Jurisdiction - The Czech Republic currently has a number of laws related to various taxes imposed by governmental authorities.  Applicable taxes include gaming tax, value-added tax or VAT, charity tax, and payroll (social) taxes.  Tax declarations, together with other legal compliance areas (e.g. customs and currency control matters) are subject to review and investigation by a number of governmental authorities, which are enabled by law to impose fines, penalties and interest charges, create tax risks in the Czech Republic.  Management believes that it has adequately provided for its Czech tax liabilities as of June 30, 2011.

Legal Proceedings - The Company is often subject to various contingencies, the resolutions of which, its management believes, will not have a material adverse effect on the Company’s consolidated financial position or

6

Table of Contents

results of operations.  TWC was not involved in any material litigation during the quarter ended June 30, 2011, or through the date of this filing.

4.              Liquidity.

As of June 30, 2011, the Company had a working capital deficit of approximately $3,133, a decrease in the deficit of $645 compared to the working capital deficit of $3,778 at December 31, 2010.  This deficit reduction for the six months ended June 30, 2011 was primarily due to the positive net income earned during that period.

As of June 30, 2011, the Company had fully drawn down its credit facility’s credit line limit of Czech Koruna (“CZK”) 35,000, or approximately $2,100.  The Company was in full compliance with the credit facility’s financial covenants.

The Company’s management believes that its cash resources at June 30, 2011, in addition to the anticipated cash to be provided by existing operations, will be sufficient to satisfy its accounts payable and other current obligations and fund its operating activities for the next twelve months.  However, should cash from operations be insufficient to cover the above objectives, the Company may seek to raise additional debt and/or equity capital in order to fund its current liabilities, operations and growth strategies.  There is no guarantee that such funds will be available to TWC at favorable terms or at all, in which case the Company may decide to reduce its operations and its development plans.

5.              Summary of Selected Significant Accounting Policies.

(a)          Revenue recognition - The Company complies with GAAP requirements for revenue recognition in its financial statements.  Casino revenue is defined as the net win from gaming activities, which is the difference between gaming wagers and the amount paid out to patrons, and is recognized on the day it is earned. Revenues generated from ancillary services, including lodging, sales of food, beverage, cigarettes, and casino logo merchandise are recognized at the time the related services are performed and represent, on an individual basis, less than three percent of total revenues.

(b)         Earnings per share - The Company complies with GAAP accounting and disclosure requirements regarding earnings per share. Basic earnings (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share incorporate the dilutive effect of common stock equivalents on an average basis during the period. The Company’s common stock equivalents currently include stock options, warrants and deferred compensation stock. Thus, unexercised stock options to purchase up to 838,025 and 838,525 shares as of June 30, 2011 and June 30, 2010, respectively, were included in the computation of diluted earnings per common share, if such unexercised stock options were “in-the-money” and vested. Warrants to purchase up to 75,000 shares were also included, if they were “in-the-money” and vested. In addition, 51,538 and 47,234 issuable shares, as of June 30, 2011 and June 30, 2010, respectively, under the Company’s Deferred Compensation Plan were also included in the computation.

7

Table of Contents

A table illustrating the impact of dilution on earnings per share, based on the treasury stock method, is presented below:

(c)          Goodwill - Goodwill represents the excess of the cost of the Company’s Czech subsidiaries over the fair value of their net assets at the date of acquisition, which consisted of the Ceska and Rozvadov casinos and the land in Hate, which is currently, the Route 59 Casino. Goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. The Company has allocated the goodwill over two reporting units that are components of the operating segment “Czech subsidiaries” and are classified as the “German reporting unit” which consists of the Ceska and Rozvadov casinos, and the “Austrian reporting unit” which consists of the Route 55 and Route 59 casinos and the Hotel Savannah. The impairment assessment requires the Company to compare the fair value of its two reporting units to their respective carrying values to determine whether there is an indication that an impairment exists. The fair value of the two reporting units were determined through a combination of recent appraisals of the Company’s real property and a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which was based on the Company’s experience and data from independent, third parties. As required, the Company performed its required annual fair-value based testing of the carrying value of goodwill related to its two reporting units at September 30, 2010, and determined that goodwill was not impaired. The Company will perform its required annual assessment of goodwill during the third quarter of 2011. There were no indicators of impairment present during the interim periods following the annual testing date, therefore the Company determined that there was no impairment of goodwill at June 30, 2011.

(d)         Property and Equipment - Property and equipment is stated at cost less accumulated depreciation and amortization.  TWC capitalizes the cost of improvements that extend the life of the asset and expenses maintenance and repair costs as incurred.  The Company provides for depreciation and amortization using the straight-line method over the following estimated useful lives:

8

Table of Contents

At June 30, 2011 and December 31, 2010, land, property and equipment consisted of the following:

(e)          Impairment for long-lived assets - The Company adheres to GAAP for the impairment on disposal of long-lived assets and periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable assets to be held and used may be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived assets, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists. If an asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value. An estimate of the asset’s fair value is based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable market value. There were no impairment losses for long-lived assets recorded for the six months ending June 30, 2011.

(f)            Foreign currency translation - The Company complies with GAAP accounting and reporting requirements for foreign currency translation, where for foreign subsidiaries whose functional currency is the local foreign currency, balance sheet accounts and cash flows are translated at exchange rates in effect at the end of each reporting period and resulting translation adjustments are included in “accumulated other comprehensive income (loss).” Statement of operations accounts are translated by applying the monthly averages of the daily exchange rates of one (1) USD dollar to one (1) CZK at the end of the respective month on the respective monthly local Czech statement of operations accounts for the period.

The impact of foreign currency translation on goodwill is presented below:

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

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

9

Table of Contents

(g)         Stock-based compensation - The Company complies with the GAAP accounting and reporting requirements for share-based payments which permit companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of share-based payments for all share-based payments vested after that date, and based on these requirements for all unvested awards granted prior to the effective date of this pronouncement. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permit entities to restate financial statements of previous periods, either for all prior periods presented or to the beginning of the fiscal year in which the statement is adopted, based on previous pro forma disclosures made in accordance with this pronouncement.  Accordingly, the Company has adopted the modified prospective method of recognition, and began applying the valuation and other criteria to stock options granted beginning January 1, 2006. The Company is recognizing expense for the unvested portion of previously issued grants based on the valuation and attribution methods used previously to calculate the pro forma disclosures. The Company did not recognize expense for employee stock options prior to January 1, 2006.

The Company currently utilizes the Black-Scholes option pricing model to measure the fair value of stock options granted to certain key employees. While this pronouncement permits entities to continue to use such a model, it also permits the use of a “lattice” model. The Company expects to continue using the Black-Scholes option pricing model in connection with its adoption of this pronouncement to measure the fair value of stock options granted.

(h)         Comprehensive income (loss) — The Company complies with GAAP accounting and reporting requirements for reporting comprehensive income. Those requirements establish rules for reporting and display of comprehensive income (loss) and its components.  Furthermore, they require the Company’s change in the foreign currency translation adjustments to be included in other comprehensive income (loss).

(i)             Promotional allowances — Promotional allowances primarily consist of food and beverages (“F&B”) and, to certain of its valuable players, hotel accommodations, all of which are furnished gratuitously.  For the six months ended June 30, 2011 and 2010, revenues do not include the retail amount of F&B and hotel accommodations of $3,221 and $2,961, respectively, provided at no-charge to customers. The retail value of the F&B given away is determined by dividing the F&B costs charged to the gaming operation of $1,291 and $1,267, for the respective periods, by the average percentage of cost of F&B sold.  The cost of hotel accommodations is either the out-of-pocket expenses paid to other hotels or the retail charge of rooms at the Hotel Savannah. The promotional allowances are summarized below:

(j)             Czech taxes — The majority of TWC’s revenues are derived from gaming operations in the Czech Republic, which are subject to gaming taxes only, while its non-gaming revenues, which are not material, have minor corporate income tax liabilities under Czech law.  For the six and three months ended June 30, 2011, TWC’s gaming taxes were approximately $783 and $401, compared with $785 and $383, respectively, for the comparable periods of 2010.  Gaming taxes are computed on gross gaming revenues, which is comprised of live (table) games and slot games revenues. For live game revenue, the applicable taxes and fees are: (i) a 10% administration tax; (ii) a 1% state supervision fee; and (iii) a charity contribution (tax) (herein referred to as the charity tax) according to a gross revenue formula specified by the Czech Ministry of Finance, net of the aforementioned taxes and fees. The applicable charity tax rate is determined separately on annual live game and slot game revenues, net of the above taxes and fees.  Therefore, for all gaming revenue, net of applicable taxes and fees, up to CZK 50,000, or approximately $3,000 at the June 30, 2011 exchange rate, a 6% charity tax

10

Table of Contents

applies; up to CZK 100,000, or around $6,000 at the same exchange rate, an 8% rate applies; up to CZK 500,000, or approximately $29,800 at the same exchange rate, a 10% rate applies; and above the CZK 500,000 gaming revenue threshold, a 15% rate applies.  For slot game revenue, the applicable assessment is the charity tax for publicly beneficial, cultural, sporting and welfare purposes, net of local (municipality) administration and slot state-licensing fees. Charity taxes for the three and six months ended June 30, 2011 were $758 and $1,447, versus $627 and $1,306, respectively, for the comparable periods in 2010.

Gaming taxes payable are due to the Czech Ministry of Finance annually, typically in April or May of the subsequent year, while charity taxes payable, although having no stated due dates, are paid as mutually agreed with the charities by May of the subsequent year. The Company may allocate this charity contribution to local schools, sports clubs, subsidized or volunteered organizations, or municipalities in which each of the Company’s casinos operate. The distribution is subject to the prior approval of the Czech Ministry of Finance. On May 9, 2011, according to the customary demand notice, the Company remitted to the Ministry of Finance the balance due on its 2010 gaming taxes of approximately CZK 27,000, or $1,600.

In conformity with the European Union (“EU”) taxation legislation, when the Czech Republic joined the EU in 2004, its value added tax (“VAT”) increased from a range of 5% to 22%, beginning in January 2004, up to a range of 9% to 19%, by December 31, 2009 for all intra-EU generated purchases. All non-EU generated purchases were impacted by identical VAT increases, beginning in May 2004.  Effective January 1, 2010, VAT rates increased to a range of 10% to 20% in the Czech Republic.  The Company pays its VAT directly to its vendors in connection with any purchases that are subject to this tax.  Unlike in other industries, VATs are not recoverable for gaming operations.  As for the Company’s new hotel operation, Hotel Savannah, the recoverable VAT was non-material for the three and six month periods in 2011 and 2010, respectively.

(k)          Income taxes — The Company complies with GAAP accounting and reporting requirements with respect to accounting for income taxes, which require an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed for differences between the financial statement and the tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.  Accounting for income taxes prescribes, among other things, a recognition threshold and measurement attributes for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return. Accounting for income taxes utilizes a two-step approach for evaluating uncertain tax positions. Step one or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two or measurement, is based on the largest amount of benefit, which is more likely than not to be realized on settlement with the taxing authority. The Company is subject to income tax examinations by major taxing authorities for all tax years subsequent to 2007. The adoption of the provisions of accounting for income taxes did not have a material impact on the Company’s consolidated financial statements. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulation and interpretations, thereof.  During the six months ended June 30, 2011, the Company recognized no adjustments for uncertain tax positions.

(l)             Recently issued and adopted accounting standards:

In April 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2010-16, which requires that an entity should not accrue a jackpot liability (or portions thereof) before the jackpot is won if the entity is not obligated to pay out that jackpot. Jackpots should be accrued and charged to revenue when an entity has the obligation to pay the jackpot. The Company adopted the pronouncement on January 1, 2011 resulting in no impact to the Company’s consolidated balance sheets, statements of income and cash flows.

In December 2010, the FASB issued ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” This update provides amendments to Accounting Standards Codification (“ASC”) Topic 350, “Intangibles, Goodwill and Other,” that requires an entity to perform Step 2 impairment test even if a reporting unit has zero or negative carrying amount. Step 1

11

Table of Contents

tests whether the carrying amount of a reporting unit exceeds its fair value. Previously reporting units with zero or negative carrying value passed Step 1 because the fair value was generally greater than zero. Step 2 requires that impairment testing and impairment valuation be calculated in between annual tests if an event or circumstances indicate that it is more likely than not that goodwill has been impaired. ASU No. 2010-28 was effective beginning January 1, 2011. As a result of this standard, goodwill impairments may be reported sooner than under current practice. The adoption of this guidance on January 1, 2011 did not have a material effect on the Company’s consolidated financial statements.

In December 2010, the FASB issued ASU No. 2010-29, “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations.”  ASU No. 2010-29 requires that if a public entity presents comparative financial statements, the entity should disclose only revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. This ASU also expands the disclosure requirements regarding supplemental pro forma adjustments to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU No. 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2010 (the first quarter of fiscal 2011 for the Company). The Company will provide the supplementary pro forma information in connection with any future business combinations.

(m)       New accounting pronouncements:

On June 16, 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income (Topic 220),” which requires companies to report total net income, each component of comprehensive income, and total comprehensive income on the face of the income statement, or as two consecutive statements. The components of comprehensive income will not be changed, nor does the ASU affect how earnings per share is calculated or reported. These amendments will be reported retrospectively upon adoption. The adoption of the ASU will be required for the Company’s first quarter 2012 Form 10-Q, and is not expected to have a material impact on the Company.

12

Table of Contents

ITEM 2.                                                  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note on Forward-Looking Information

This Form 10-Q contains certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the use in those statements of terminology such as “may,” “will,” “could,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” or “continue,” or the negative of such terms or other comparable terminology. The forward-looking statements included in this Form 10-Q address activities, events or developments that we expect or anticipate will or may occur in the future.

Although we believe the expectations expressed in the forward-looking statements included in this Form 10-Q are based on reasonable assumptions within the bounds of our knowledge of our business at the time the statements are made, a number of factors outside of our control could cause actual results to differ materially from those expressed in any of the forward-looking statements included in this Form 10-Q. Any one or a combination of these factors, or other factors not now known, could materially affect our financial performance, business strategy, business operations, plans, goals and objectives. These factors include but are not limited to:

·                                          the market’s acceptance of our gaming offerings;

·                                          the effect of competition in our markets;

·                                          the political, legislative, and regulatory climates and changes upon our business;

·                                          the impact of fluctuations of currencies on revenue we receive or expenses we incur; and,

·                                          other factors described in our Form 10-K for the year ended December 31, 2010 under the headings “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk.”

Forward-looking statements that we make or that are made by others on our behalf are based on a knowledge of our business and the environment in which we operate, but because of the factors listed above, actual results may differ significantly from those in forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. The results or developments we anticipate may not be realized. Even if substantially realized, those results or developments may not result in the expected consequences for us or affect us, our business or our operations in the ways we expect. We caution readers not to place undue reliance on any of these forward-looking statements in this Form 10-Q, which speak only as of their dates. We assume no obligation to update any of the forward-looking statements.

Nature of Business and Competition

We are engaged in the acquisition, development and management of niche casino operations in Europe, which feature gaming tables and mechanized gaming devices, such as video slot machines, as well as the acquisition, development and the management of midsize hotels, which may include casino facilities.  Our expansion into the hotel industry was founded on management’s belief that hotels in the midsize class are complementary to our casino brand; that opportunities in one of these two industries often lead to, or are tied to, opportunities in the other industry; and that a more diversified portfolio of assets will give us greater stability and make us more attractive to potential investors.  Further, several of our top management executives have extensive experience in the hotel industry.  In this pursuit, we have developed our first hotel, Hotel Savannah, a 77-room, European four-star deluxe hotel, adjoining our Route 59 Casino, which primarily draws customers from the Vienna, Austria regional area.

Currently, we own and operate four casinos in the Czech Republic (“CZ”), and manage, under a 10-year management contract expiring in 2017, a casino and nightclub in Croatia.  With respect to our Czech casinos, two are located in the western part of the CZ, close to the border of Germany.  The larger of the two, located in Ceska Kubice (“Ceska”), currently has four competitors. The smaller one is located in the town of Rozvadov (“Rozvadov”), and currently has one competitor.  The other two Czech casinos are located in the southern part of the CZ, close to the Austrian border.  The larger of these two, “Route 55,” located in Dolni Dvoriste, has two competitors, and the other

13

Table of Contents

casino, “Route 59,” is located in Hate, near Znojmo, and currently has two competitors.  In April 2009, we launched our newly constructed 77-room, European four-star hotel, Hotel Savannah.  The hotel is connected to our Route 59 casino with the joint facility’s main restaurant linking the two buildings.  Hotel Savannah also features eight banquet halls for meetings and special events as well as a restaurant and bar.  Along with the hotel operation, we also launched a contracted luxury spa operation, the Spa at Hotel Savannah (the “Spa”), which is attached to Hotel Savannah.  The Spa, which features Ayurvedic therapies and an indoor pool, began operation in March 2009.

The Croatian casino and adjoining nightclub (collectively known as the “Grand Casino Lav”), is located in the Grand Hotel Lav resort in the city of Podstrana, near Split, Croatia.  The Grand Casino Lav’s revenues and expenses are recognized on the owner’s books.  We derive only management fee income from the performance results of the Grand Casino Lav, which is recognized in our consolidated financial statements.  The Grand Casino Lav currently has two competitors.

Exchange Rates

Due to the fact that the Company’s operations are located in Europe and principally in the Czech Republic, TWC’s financial results are subject to the influence of fluctuations in foreign currency exchange rates.  The revenue generated by our Czech operations is generally denominated in EUR and the expenses incurred by these facilities are generally denominated in CZK.  As our primary reporting subsidiary, ACC, is a Czech entity, all revenues and expenses, regardless of sources of origin (e.g. Croatia), are recognized in the Czech currency and translated to USD for reporting purposes.  A substantial change in the value of either of these currencies in relation to the value of the USD would have an impact on the results from our operations when translated into USD.  We do not hedge our foreign currency holdings.

The actual 2011 and 2010 operating results in local currency for the Czech casino units were converted to USD using the average of the daily exchange rates of each month in the reporting periods.  As all of the Grand Casino Lav’s operating results, including revenues and expenses, are recognized on the owner’s books, the foreign currency exchange impact is limited to only our earned management fees income, which was not material for the periods reviewed.  The monthly average exchange rates for the CZK versus the USD and EUR, respectively, are presented in the following graphical chart.

The consolidated balance sheet totals of the Company’s foreign subsidiaries at June 30, 2011 and December 31, 2010 were converted to USDs using the interbank exchange rates, as reported at www.oanda.com, which are depicted in the following table:

14

Table of Contents

Critical Accounting Policies

The discussion and analysis of our consolidated financial condition and results of operations are based upon our condensed consolidated financial statements. These condensed financial statements have been prepared following the US GAAP and by Article 10 of Regulation S-X for interim periods and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates, including those related to potential impairment of goodwill and share-based compensation expense. As these are condensed consolidated financial statements, the reader should also review expanded information about our critical accounting policies and estimates provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Form 10-K for the year ended December 31, 2010. There have been no material changes to our critical accounting policies and estimates from the information provided in our Form 10-K for the year ended December 31, 2010.

RESULTS OF OPERATIONS

Performance Measures and Indicators

In discussing the consolidated results of operations, we may use or refer to performance measures and indicators that are common to the gaming industry, such as: (i) total (live game) drop, the dollar value of gaming chips purchased in a given period; (ii) (live game) drop per head (“DpH”), the per guest average dollar value of gaming chips purchased; (iii) daily income per (slot) machine; (iv) net win, the difference between live game wagers and the amount paid out to patrons; (v) win percentage (“WP”), the ratio of net win over total drop; and (vi) occupancy rate, the number of rooms sold divided by the number of rooms available.  These measures are “non-GAAP financial measures.”

Review of the Condensed Consolidated Interim Results of the Company:

Three Months Ended June 30, 2011 and 2010:

For the quarter ended June 30, 2011, our total revenues rose 21.1%, to $9.7 million, from $8.0 million for the quarter ended June 30, 2010.  The approximate $1.7 million increase was attributable to a combination of: (i) a Company-wide emphasis on internal, player-loyalty programs, which incentivized players to increase playtime; (ii) the absence of the FIFA World Cup which took place between June 11 and July 11 of last year; and (iii) the increasing popularity of slot games with our clientele.  The shift toward more loyalty reward programs served to refine the player base toward more high-stake players, which was reflected in the 2.1% decline in live game attendance and an increase of 12.8% in DpH over the same quarter in 2010.   Supported by a 20.8% slot attendance increase, quarterly slot revenues improved by 39.4% over the same quarter a year ago.

Operating costs and expenses increased by approximately $1.4 million, or 18.9%, from approximately $7.4 million for the quarter ended June 30, 2010 to approximately $8.8 million for the quarter ended June 30, 2011, mainly due to higher volume-based gaming taxes and payroll, increased amenity expenses, and higher depreciation and amortization expenses.

Income from operations increased by $299,000, or 46.2%, from the second quarter in 2010, as a result of the above factors.

Other expense for the quarter ended June 30, 2011 decreased by $55,000, or 34.8%, to $103,000 from $158,000 for the same quarter last year, and represents lower interest, due to a lower interest rate, paid on the Company’s credit facility.

15

Table of Contents

Consequently, net income for the three months ended June 30, 2011 improved by $354,000, or 72.4%, to $843,000, versus a net income of $489,000 for the three months ended June 30, 2010.

Costs and Expenses

Total costs and expenses for the three months ended June 30, 2011 and 2010 are presented below:

Cost of revenues for the quarter ended June 30, 2011 increased by $860,000, or 19.6%, primarily due to higher volume-driven gaming taxes and payroll.  The complimentary F&B and hotel accommodations costs were recognized in the gaming departmental expenses, which totaled approximately $719,000 or 7.8% of gaming revenues for the three months ended June 30, 2011, compared with $631,000 or 8.4% of gaming revenues for the comparable quarter last year.  General gifts and giveaways represented $163,000 or 1.8% of gaming revenues, versus $108,000 or 1.4% of gaming revenues in the same quarter of 2010.  These expenses were also recognized in the gaming departmental expenses.

Depreciation and amortization expense increased by $119,000, or 25.1%, notably due to the addition of three VIP hotel rooms at Route 55, and an upgrade of the centralized, back-office accounting system.

Selling, general and administrative costs increased by $417,000, or 16.6%, due primarily to increased project development expenses, higher maintenance costs and utility expenses.

Six Months Ended June 30, 2011 and 2010:

For the six months ended June 30, 2011, our total revenues climbed approximately $1.8 million, or 10.6%, to approximately $18.4 million, from approximately $16.6 million for the same period ended June 30, 2010, notably due to a 23.5% increase in slot revenues and 8.2% increase in rooms, spa and F&B revenues at our Hotel Savannah, which more than offset the flat live games revenues.

Live game attendance declined 0.8% while slot game attendance rose 18.6%, when compared with the same six-month period a year ago, largely due to several factors, including a milder winter this year versus 2010, which recorded an average of 21 days per casino of restricted travel due to the winter severity, the absence of the FIFA World Cup, in which Germany made it to the semi-finals, and the increasing popularity of slot games with our clientele.

Combined hotel rooms, restaurant and banquet operations, and spa revenues totaled 4.6% of the Company’s total consolidated revenue.

Total operating costs and expenses increased by $1.4 million or 9.3%, mainly due to the continuation and expansion of the Company’s player loyalty reward programs that have proven successful since implementation in the last quarter of 2010.  We have also increased expenditures in promotional activities, gifts and giveaways and complimentary buffets and beverages, as detailed below, to further enhance these player loyalty programs.  These promotional costs

16

Table of Contents

have proven to be more cost-effective in drawing and keeping players in our casinos than general marketing initiatives which are broader in range and targeted for name exposure and event promotions.

As a result of the lower costs approach, income from operations have risen 28.4% or $315,000 from the first six months of 2010.

Other expense, representing primarily interest expense, was lower by $124,000, as a result of lower interest rates applicable to our credit facility payments.

Consequently, net income for the six months ended June 30, 2011 increased by $439,000 or 56.6%, versus the same period a year ago.

Costs and Expenses

Total costs and expenses for the six months ended June 30, 2011 and 2010 are presented below:

Cost of revenues for the six months ended June 30, 2011 increased by $949,000, or 10.5%, primarily due to volume-driven costs, such as gaming taxes, labor, and to increased player-related amenities and player-loyalty programs.

Complimentary F&B and hotel accommodations costs were recognized in gaming departmental expenses, which totaled $1.4 million or 8.1% of gaming revenues for the six months ended June 30, 2011, versus approximately $1.3 million or 8.1% of gaming revenues for the comparable six-month period in 2010.  General gifts and giveaways, which were also recognized in gaming departmental expenses, represented $338,000 or 1.9% of gaming revenues for the same six months in 2011, compared with $224,000 or 1.4% of gaming revenues for the six months ended June 30, 2010, a comparable increase of $114,000 or 51.1%.

Depreciation and amortization expense increased by $171,000, or 17.4%, largely due to the addition of three VIP hotel rooms at Route 55 and the upgrade of the centralized, back office accounting system at our operating subsidiary, ACC.

Selling, general and administrative costs of $5.8 million for the six months ended June 30, 2011 increased by $334,000 or 6.1% from the same period in 2010, principally due to higher project development costs, which were partially offset by lower overall marketing and promotional expenses.

Our Facilities:

Each of our casinos offers a restaurant and a full bar, and in the larger units, lounge areas and multiple bars.  All of our casinos operate under the registered ACC brand.

Ceska

Ceska Casino, which has a 1920’s Chicago Prohibition Period theme, currently has 15 gaming tables, including eight card tables and seven roulette tables, and 80 video slot machines.

Rozvadov

Rozvadov Casino, which has a South Pacific theme, currently operates eight gaming tables, including four card tables and four roulette tables, and 24 video slot machines.

17

Table of Contents

Route 59

Route 59 Casino, which has a 1920’s New Orleans theme, currently includes 23 gaming tables, which consist of 13 card tables, nine roulette tables, a Slingshot multi-win roulette, and 114 video slot machines.

Route 55

Route 55 Casino, our largest casino, features an early 1950’s Miami Beach theme.  The two-story casino offers 23 tables, including 12 card tables, 10 roulette tables, a Slingshot multi-win roulette, and 124 video slot machines.  On the mezzanine level, the casino offers a full-service Italian restaurant, an open buffet area, a VIP lounge, and a VIP gaming room equipped with four gaming tables, which are included in the 23 table count.

Grand Casino Lav

The Grand Casino Lav currently has 18 gaming tables, including six roulette tables, 12 card tables, two of which are in the VIP dedicated area, 60 video slot machines, a mezzanine bar with a panoramic view overlooking the gaming floor, and a full-service nightclub.

Hotel Savannah and the Spa at Hotel Savannah

The hotel, which is connected to our Route 59 casino, features banquet halls for conference meetings and special events as well as a restaurant and bar.  To complement the hotel, we also opened a luxury spa operation, the Spa, in April 2009, which is attached to our hotel. The Spa, which is operated by a independent contractor from which we receive revenue-based fees, features a large indoor pool and offers Ayurvedic therapies to all our hotel guests and outside visitors.

Sales and Marketing