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 or product sales, including hotel lodging, sales of food, beverage, cigarettes, and casino logo merchandise are recognized at the time the related services are performed or the products are sold and represent, on an aggregate basis, less than ten percent of total revenues.

(b)Earnings per share  Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings 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, restricted stock, and deferred compensation stock. Thus, unexercised stock options to purchase up to 520,450 and 598,750 shares as of September 30, 2014 and September 30, 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 and restricted stock to purchase up to an aggregate of 150,000 shares were also included, if they were “in-the-money” and vested. In addition, 301,391 and 226,441 issuable shares, as of September 30, 2014 and September 30, 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, based on the treasury stock method, is presented below:

	For the Nine Months Ended				For the Three Months Ended
(amounts in thousands, except for	September 30,				September 30,
share information)	2014		2013		2014		2013
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Basic Earnings Per Share:
Net Income	$	2,001	$	1,379	$	868	$	706

Weighted average common shares	8,811,991		8,826,375		8,816,571		8,825,335

Basic earnings per share	$	0.23	$	0.16	$	0.10	$	0.08

Diluted Earnings Per Share:
Net Income	$	2,001	$	1,379	$	868	$	706

Weighted average common shares	8,811,991		8,826,375		8,816,571		8,825,335

Addition due to the effect of dilutive securities:
Stock options, restricted stock and warrants (1)	3,606		11		6,244		11
Stock issuable under the Deferred Compensation Plan	301,391		226,441		301,391		226,441

Dilutive potential weighted average common shares	9,116,988		9,052,827		9,124,206		9,051,787

Diluted earnings per share	$	0.22	$	0.15	$	0.10	$	0.08

(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, and a parcel of land in Hate (upon a portion of which the Route 59 Casino and Hotel Savannah 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. 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 September 30, 2014, its annual assessment date. The Company expects to perform its next required annual assessment of goodwill during the third quarter of 2015. Changes to goodwill during the periods presented are strictly related to the fluctuation in foreign currency exchange rates.

(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 September 30, 2014 and December 31, 2013, property and equipment consisted of the following:

	As of September 30, 2014			As of December 31, 2013
	(Unaudited)
Land	$	3,779		$	2,714
Building and improvements	34,998			31,663
Furniture, fixtures and other equipment	10,996			11,333

	49,773			45,710
Less accumulated depreciation and amortization	(12,295		)	(12,246		)

	$	37,478		$	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 nine months ending September 30, 2014 and 2013.

(f)Foreign currency translation – The functional currency of the Czech subsidiaries is the local Czech Koruna (“CZK”) and the functional currency of the German subsidiary is the Euro (“EUR”) currency. However, as our primary reporting subsidiary, TWH&E, is a Czech entity, all revenues and expenses, regardless of sources of origin, are recognized (and in the case of the German hotel operation, are recognized first) in the Czech currency and translated to USD for reporting purposes. Accordingly, the balance sheet accounts of Trans World Hotels Germany GmbH (“TWHG”), the German subsidiary that owns the Hotel Columbus, are first translated at exchange rates of one (1) EUR to CZK in effect at the end of each reporting period (with the exception of stockholders’ equity) and resulting translation adjustments are included in “accumulated other comprehensive income (loss).” Subsequently, the consolidated Czech balance sheets (inclusive of the translated German subsidiary balance sheets) are then translated at exchange rates of CZK to US dollar (“USD”) in effect at the end of each reporting period (with the exception of stockholders’ equity) and resulting translation adjustments are included in “accumulated other comprehensive income (loss).” Income statement accounts for TWHG are translated by applying the monthly averages of the daily exchange rates of one (1) EUR to the CZK on the respective monthly EUR income statement accounts for the period, which then follows the same translation method of Czech income statement accounts to USD. The Czech consolidated income statement accounts are then translated by applying the monthly averages of the daily exchange rates of one (1) USD to the CZK on the respective consolidated monthly local Czech income statement accounts for the period.

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

Applicable

Goodwill

Foreign Exchange

German

Austrian

As of September 30, 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 September 30, 2014 FX rate of:

21.6907

USD

4,752

USD

839

USD

5,591

Net cumulative change to goodwill due to foreign currency translation

USD

1,710

USD

302

USD

2,012

(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 income statements. 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 nine months ended September 30, 2014 and 2013, respectively.

(h)Stock repurchase program  On November 12, 2013, TWC’s board of directors renewed the Company’s stock repurchase program (the “program”), in accordance with the retirement method, 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 can be modified, extended, suspended or discontinued at any time.

The repurchase transactions for the nine months ended September 30, 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 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 adjustment is included in other comprehensive income (loss).

(j)Promotional allowances — Promotional allowances primarily consist of food and beverages (“F&B”) furnished gratuitously.

The promotional allowances for the three and nine months ended September 30, 2014 and 2013 are summarized below:

	(UNAUDITED)
	For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,
(amounts in thousands)	2014			2013			2014			2013

Cost of gratuitous F&B (A)	$	1,702		$	1,744		$	568		$	598
Average cost of F&B sold (B)	31.2		%	35.4		%	34.1		%	34.0		%
Retail value of F&B (A/B)	$	5,455		$	4,927		$	1,666		$	1,759

(k)Czech gaming taxes — The Gaming Tax Law is summarized in the following table:

Basis		Gaming Tax Law *

Live Games		20% Gaming Tax from live game revenue (70% of tax paid to the federal government; 30% paid to the local municipality).

Slots		20% Gaming Tax from slot revenue (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 net income earned in the CZ, net of exemptions, as defined by CZ tax authorities (paid to the federal government).

* Gaming taxes are paid quarterly, by the 25th day following the end of a quarter. Estimated quarterly income tax payments were required commencing at the beginning of the third quarter of 2013, payable by the 25th day following the end of a quarter, with the final annual corporate income tax returns and payment obligation payable by June 30th of the following year.

TWC’s gaming-related taxes for the nine and three months ended September 30, 2014 and 2013 are summarized in the following table:

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

Gaming revenues (live-game and slot only)	$	25,262		$	23,719		$	8,409		$	8,008

Gaming taxes on live games and slots	$	5,312		$	4,994		$	1,767		$	1,689
Gaming taxes as % of gaming revenue	21.0		%	21.1		%	21.0		%	21.1		%

In conformity with the European Union (“EU”) taxation legislation, VAT rates were 15% and 21%, depending on the product or services sold and/or received. 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 on expenses under the Hotel Savannah operation was not material for the nine and three months ended September 30, 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. 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. No interest expense or penalties have been recognized as of and for the nine months ended September 30, 2014 and 2013, respectively. The Company is subject to income tax examinations by major Czech taxing authorities for all tax years since 2011.

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 net foreign income tax expense of $767 and $623 for the nine months ended September 30, 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 Financial Accounting Standards Board (“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. This guidance 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.

(n)Segment reporting — On September 10, 2014, the Company acquired Hotel Columbus and after this acquisition, the Company determined, due to the significance of the assets acquired (see Note 5 below), and pursuant to FASB Accounting Standards Codification (“ASC”) 280, Segment Reporting, that the Company had two reportable segments, a casino segment, which consists of the three Czech casinos and Hotel Savannah, and a hotel segment which solely consists of newly acquired Hotel Columbus. ASC 280 designates the internal reporting that is used by management for making operating decision and assessing performance as the source of the Company's reportable segments. The Company considered segment reporting in this interim period with respect to operational disclosures and determined it was not material as there was only one month of operations for the newly acquired Hotel Columbus. The Company intends to enhance its segment reporting disclosures during the next quarter as operations are expected to be material.