4. 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 522,600 and 660,400 shares as of March 31, 2014 and March 31, 2013, 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, 309,606 and 148,822 issuable shares, as of March 31, 2014 and March 31, 2013, 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)	2014		2013
Basic Earnings Per Share:
Net income	$	485	$	268
Weighted average common shares	8,809,894		8,828,483
Basic earnings per share	$	0.06	$	0.03

Diluted Earnings Per Share:
Net income	$	485	$	268
Weighted average common shares	8,809,894		8,828,483
Addition due to the effect of dilutive securities:
Stock options and warrants (1)	2,482		3,405
Stock issuable under the Deferred Compensation Plan	309,606		223,617
Dilutive potential common shares	9,121,982		9,055,505
Diluted earnings per share	$	0.05	$	0.03

(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 parcel of land in Hate (upon a portion of which the Route 59 Casino and Hotel Savannah and the Spa are situated). Goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Goodwill impairment tests require the Company to first assess qualitative factors, which include macroeconomic conditions, financial performance, and industry and market considerations, to determine whether it is necessary to perform a two-step quantitative goodwill impairment test. TWC 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. TWC has allocated the goodwill over two geographical 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 land in Hate. There were no indicators of impairment present during the first quarter of 2014; therefore TWC determined that there was no impairment of goodwill at March 31, 2014. The Company expects to perform its next required annual assessment of goodwill during the third quarter of 2014.

(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, 2014 and December 31, 2013, land, property and equipment consisted of the following:

	As of March 31, 2014			As of December 31, 2013
	(unaudited)
Land	$	2,711		$	2,714
Building and improvements	31,832			31,663
Furniture, fixtures and other equipment	11,573			11,333
	46,116			45,710
Less accumulated depreciation and amortization	(12,579		)	(12,246		)
	$	33,537		$	33,464

(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, 2014 and 2013.

(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

Foreign Exchange

German

Austrian

As of March 31, 2014 (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

103,072

CZK

18,195

CZK

121,267

2003 CZK balance, translated to USD,

at March 31, 2014 FX rate of:

19.9280

USD

5,172

USD

913

USD

6,085

Net increase to Goodwill

USD

2,130

USD

376

USD

2,506

(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. There were no award expenses for the three months ended March 31, 2014 and 2013, respectively.

(h) Share repurchase - On November 12, 2013, TWC’s board of directors renewed the Company’s stock repurchase program, authorizing the repurchase of up to 500,000 shares of the Company’s Common Stock over a 12-month period ending November 12, 2014. 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.

The repurchase transactions for the year 2014 are listed in the table below:

ISSUER PURCHASES OF EQUITY SECURITIES

Date	Total Number of Shares Purchased	Average Price Paid per Share		Cumulative Total of Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Program
As of 12/31/2013		$	2.80	61,500	438,500
01/09/2014	100	$	2.55	61,600	438,400
03/07/2014	300	$	3.01	61,900	438,100
03/12/2014	300	$	3.03	62,200	437,800

(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 (“F&B”) furnished gratuitously. For the three months ended March 31, 2014 and 2013, revenues do not include the retail amount of F&B of $2,133 and $1,560, 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 $576 and $571, for the respective periods, by the average percentage of cost of F&B sold.

The promotional allowances are summarized below:

	(UNAUDITED)
	For the Three Months Ended
	March 31,
(amounts in thousands)	2014			2013

Cost of gratuitous F&B (A)	$	576		$	571
Average cost of F&B sold(B)	27.0		%	36.6		%
Retail value of F&B (A/B)	$	2,133		$	1,560

(k) Czech gaming taxes — 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 paid to the federal government; 30% paid to the local municipality).

Slots		20% Gaming Tax from Win (20% of tax paid to the federal government; 80% paid to the local municipality);
		Fifty-five Korunas (or approximately three U.S. dollars) Gaming Tax per Slot Machine, per Day (paid to the federal government).

Net Income		19% corporate income tax on adjusted net income earned in the Czech Republic, net of exemptions (paid to the federal government).

* The new Gaming Tax is paid quarterly, by the 25th day following the end of a quarter, while estimated quarterly income tax payments are required the beginning of the third quarter of 2013, with the 2013 corporate income tax obligation to be paid by June 30, 2014.

TWC’s gaming-related taxes and fees for the three months ended March 31, 2014 and 2013 are summarized in the following table:

	(UNAUDITED)
	For the Three Months Ended
(amounts in thousands)	2014			2013

Gaming revenues (live-game and slot only)	$	8,314		$	7,457

Gaming taxes on live games and slots	1,750			1,573
as % of gaming revenue	21.0		%	21.1		%

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, 2014 and 2013, respectively.

(l) Income taxes — The Company complies with accounting and reporting requirements with respect to accounting for U.S. federal and foreign 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. In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, 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 of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of and for the three months ended March 31, 2014 and 2013, respectively. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2010. 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, regulations and interpretations thereof.

Effective January 1, 2012, the Czech government instituted an effective corporate income tax of 19% on income derived from 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 incurred an estimated foreign income tax expense of $231 and $173 for the three months ended March 31, 2014 and 2013, respectively. Corporate income tax is payable by the end of June of the subsequent year. Effective since September 2013, the Company began making estimated quarterly corporate income tax payments.

(m) Recently issued and adopted accounting standards:

In March 2013, the FASB issued guidance on a parent’s accounting for the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. The guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance was effective prospectively for fiscal years beginning on or after December 15, 2013, and for interim periods within those fiscal years. The Company adopted the guidance on January 1, 2014, as required. There was no material impact on its consolidated financial statements resulting from the adoption.

In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists, which requires that an unrecognized tax benefit, or portion of an unrecognized tax benefit, be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. If an applicable deferred tax asset is not available or a company does not expect to use the applicable deferred tax asset, the unrecognized tax benefit should be presented as a liability in the financial statements and should not be combined with an unrelated deferred tax asset. This guidance was effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date; however retrospective application is permitted. The Company adopted the guidance on January 1, 2014, as required. There was no material impact on its consolidated financial statements resulting from the adoption.