6. Summary of Selected Significant Accounting Policies

(a) Revenue recognition- 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- 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 660,400 and 837,500 shares as of March 31, 2013 and March 31, 2012, 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 75,000 shares were also included, if they were “in-the-money” and vested. In addition, 223,617 and 148,822 issuable shares, as of March 31, 2013 and March 31, 2012, respectively, under the Company’s Deferred Compensation Plan were also included in the computation.

A table illustrating the impact of dilution on earnings per share is presented below:

	(UNAUDITED)
	For the Three Months Ended
(amounts in thousands, except for	March 31,
share information)	2013		2012
Basic Earnings Per Share:
Income from continuing operations	$	268	$	503

Weighted average common shares	8,828,483		8,871,635

Basic earnings per share	$	0.03	$	0.06

Diluted Earnings Per Share:
Income from continuing operations	$	268	$	503

Weighted average common shares	8,828,483		8,871,635

Addition due to the effect of dilutive securities:
Stock options and warrants (1)	3,405		21,451
Stock issuable under the Deferred Compensation Plan	223,617		148,822

Dilutive potential weighted average common shares	9,055,505		9,041,908

Diluted earnings per share	$	0.03	$	0.06

(1) Per the treasury stock method.

(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 casino, the Rozvadov casino (which was sold in 2012) 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 casino, and the “Austrian reporting unit” which consists of the Route 55 and Route 59 casinos and the Hotel Savannah. Goodwill impairment tests require the Company to first assess qualitative factors to determine whether it is necessary to perform a two-step quantitative goodwill impairment test. The Company is not required to calculate the fair value of a reporting unit unless it determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The Company assesses the potential impairment of goodwill annually (as of September 30th) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Upon completion of such review, if impairment is found to have occurred, a corresponding charge will be recorded.

Based on TWC’s own assessment of qualitative factors which included an analysis of macroeconomic conditions, financial performance, and industry and market considerations, the Company concluded that it was not necessary to perform a two-step quantitative goodwill impairment test and that the goodwill of the Company was not impaired as of March 31, 2013.

(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:

Asset		Estimated Useful Life

Building and improvements		5-50 years
Furniture, fixtures and other equipment		4-12 years

At March 31, 2013 and December 31, 2012, land, property and equipment consisted of the following:

	As of March 31, 2013			As of December 31, 2012
	(unaudited)
Land	$	2,561		$	2,691
Building and improvements	29,512			31,131
Furniture, fixtures and other equipment	12,825			13,122

	44,898			46,944
Less accumulated depreciation and amortization	(12,566		)	(12,877		)

	$	32,332		$	34,067

(e) Impairment for long-lived assets- The Company 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 three months ending March 31, 2013 and 2012.

(f) Foreign currency translation - 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) US dollar (“USD”) to the Czech Koruna (“CZK”) on the respective monthly local Czech statement of operations accounts for the period.

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

Applicable

Goodwill

(UNAUDITED)

Foreign Exchange

German

Austrian

As of March 31, 2013 (in thousands, except FX)

Rate (“FX”)(2)

reporting unit

Total

Residual balance, as of January 1, 2003 (in USD) (1)

USD

3,042

USD

537

USD

3,579

USD residual balance, translated at June 30, 1998 (date of acquisition) FX rate of:

33.8830

CZK

103,077

CZK

18,190

CZK

121,267

2003 CZK balance, translated to USD, at March 31, 2013 FX of:

20.0417

USD

5,143

USD

908

USD

6,051

Net increase to Goodwill

USD

2,101

USD

371

USD

2,472

(1) Goodwill was amortized over 15 years until the Company started to comply with revised 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.

(g) Stock-based compensation- The Company recognizes the fair value of stock-based compensation in the condensed consolidated statement of operations. The fair value of the Company’s stock option awards are estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of stock-based awards is amortized over the vesting period of the award. The award expenses for the three months ended March 31, 2013 and 2012 were $0 and $34, respectively.

(h) Share repurchase - On November 12, 2012, TWC’s board of directors approved a stock repurchase program, authorizing the repurchase of up to 500,000 shares of the Company’s Common Stock over a 12-month period. The program does not obligate the Company to acquire any particular amount of Common Stock, and it could be modified, extended, suspended or discontinued at any time. Thus, pursuant to the stock repurchase program and through a registered broker-dealer, TWC began repurchase transactions on the open market beginning on November 23, 2012 through the end of the current quarter ending March 31, 2013. The transaction details are included in “Part II. Item 5. Other Information” of this report.

(i) Comprehensive income (loss) — The Company’s change in the foreign currency translation adjustments is included in other comprehensive income (loss).

(j) Promotional allowances — Promotional allowances primarily consist of food and beverages and, to certain of its valuable players, hotel accommodations, all of which are furnished gratuitously. For the three months ended March 31, 2013 and 2012, revenues do not include the retail amount of food and beverages and hotel accommodations of $1,575 and $1,586, respectively, provided at no-charge to customers. The retail value of the food and beverages given away is determined by dividing the food and beverage costs charged to the gaming operation of $571 and $538, for the respective periods, by the average percentage of cost of food and beverages sold. The cost of hotel accommodations is either the out-of-pocket expenses paid to other hotels that provide rooms for our players or the retail charge for rooms at the Hotel Savannah.

The promotional allowances are summarized below:

	(UNAUDITED)
	For the Three Months Ended
	March 31,
(amounts in thousands)	2013			2012

Cost of gratuitous food and beverages (A)	$	571		$	538
Average cost of food and beverages sold(B)	36.6		%	34.1		%

Retail value of food and beverages (A/B)	$	1,560		$	1,578
Retail value of hotel accommodations	15			8
Total promotional allowances	$	1,575		$	1,586

(k) Czech gaming taxes — Effective January 1, 2012, TWC merged its three Czech slot subsidiary companies, ACC Slot, s.r.o., Hollywood Spin s.r.o. and LMJ Slot s.r.o. into its primary Czech operating entity company, American Chance Casinos a.s., in an effort to eliminate and/or reduce redundancy in operations, maintenance and operating costs.

The new Gaming Tax Law is summarized in the following table:

		New Gaming Tax Law *
		(effective January 1, 2012)

Live Games		20% Gaming Tax from Win (70% of tax to federal; 30% to local municipality).

Slots		20% Gaming Tax from Win (20% of tax to federal; 80% to local municipality); 55 CZK (or $3) Gaming Tax per Slot Machine, per Day.

Net Income		19% corporate income tax on adjusted net income, net of exemptions (to federal)

* The new Gaming Tax is to be paid quarterly, by the 25th day following the end of a quarter, while the 2012 corporate income tax obligation is to be paid by end of June of the subsequent year, followed by estimated quarterly payments beginning in September 2013.

TWC’s gaming-related taxes and fees for the three months ended March 31, 2013 and 2012 are summarized in the following table:

	(UNAUDITED)
	For the Three Months Ended
(amounts in thousands)	2013			2012

Gaming revenues (live-game and slot only)	$	7,457		$	8,563

Gaming taxes on live games and slots	1,573			1,764
Licensing fees (eliminated in 2012) *				143
Total gaming taxes and fees	$	1,573		$	1,907
as % of gaming revenue	21.1		%	22.3		%

* As the non-refundable, six-month licensing fees effective for January 2012 through June 2012 were paid in October 2011, prior to the passing of New Gaming Tax laws in December 2011, the Company incurred additional taxes for the first six months of 2012. Excluding the non-recurring licensing fees, the gaming taxes and fees for the year 2012 would have been 20.6% of gaming revenue.

In conformity with the European Union (“EU”) taxation legislation, when the Czech Republic joined the EU 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. Between January 1, 2010 and December 31, 2012, VAT rates increased to between 10% and 20%, then to 15% and 21%, beginning on January 1, 2013. The applicable VAT rate varies depending on the product or services sold and/or received. All non-EU generated purchases were impacted by identical VAT increases, beginning in May 2004. The VAT top rate rose to 21% beginning on January 1, 2013. 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. The recoverable VAT under the Hotel Savannah operation was non-material for the quarters ended March 31, 2013 and 2012, respectively.

(l) 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 U.S. and foreign taxing authorities for all tax years subsequent to 2008. The adoption of the provisions of the FASB standard, “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 period ended March 31, 2013, the Company recognized no adjustments for uncertain tax positions.

Effective January 1, 2012, the Czech government instituted an effective corporate income tax, currently at 19.0%, on gaming revenues, which prior to the law changes were subject only to gaming taxes. As a result of the new tax laws and due to the material income tax liability, the Company accrued an estimated foreign income tax expense of $173 and $374 for the three months ended March 31, 2013 and 2012, respectively. Foreign book tax differences on fixed assets have resulted in a long-term deferred tax liability of $549, which is included in long-term liabilities on the balance sheet. Corporate income tax is payable by the end of June of the subsequent year, followed by estimated quarterly corporate income tax payments beginning in September 2013.