Nature of Business and Liquidity

12 Months Ended

Dec. 31, 2011

Nature of Business and Liquidity

Nature of Business and Liquidity

NOTE 1 - Nature of Business and Liquidity

Nature of Business

Trans World Corporation and Subsidiaries (collectively, “TWC” or the “Company”), a Nevada corporation, is primarily engaged in the gaming 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, has reduced its operation, effective February 1, 2012, to slots only, due to the lack of a viable market for live games.  It currently operates 20 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.  In addition to the casinos, TWC also own and operate a 77-room, four-star deluxe hotel, the Hotel Savannah, which is physically connected to our Route 59 casino, and a full-service spa, the Spa at Savannah (the “Spa”), which is operated by an independent contractor and is attached to the hotel. The hotel features eight banquet halls for meetings and special events as well as a full-service restaurant and bar.

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.  Grand Casino Lav’s management fee income contribution to the year 2011 operational results was not material.

Liquidity

At December 31, 2011, the Company had a working capital deficit of $3,070 versus a working capital deficit of $3,778 at December 31, 2010.

In January 2011, the terms of TWC’s revolving credit line with Commerzbank were amended to extend the expiration to November 4, 2012.  Furthermore, as part of this amendment, the applicable quarterly interest rate margin on the term loan and the revolving credit line increased by an additional 100 basis points, to 600 basis points and 500 basis points, respectively.  The credit facility includes financial covenants, security and requirements, which include: (i) a mandatory annual prepayment that requires that 25% of the Company’s excess cash above a certain annually-escalating bank balance at the end of each fiscal year be applied toward the term loan’s principal balance; (ii) the pledge of the Route 59 and Route 55 casinos, Hotel Savannah and other guarantees as security; and (iii) the term loan to be repaid quarterly in equal principal installments, with the applicable interest based on three-month PRIBOR rate plus the said basis points.  The term loan matures on November 4, 2013.

The Company’s management believes that its cash resources at December 31, 2011, in addition to the anticipated cash to be provided by existing operations will be sufficient to meet current obligations and fund its operating activities for the next twelve months.  However, should cash from operations and the credit facility be insufficient to cover these 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 development plans and or operations.  The Company is in full compliance with the credit facility’s financial covenants up to and including the year ended December 31, 2011.  (See also “Note 4 — Long-Term Debt,” below).